Why commercial real estate makes you more money

by Neil Sharma on 14 Mar 2018

Vancouver-based Sam Beckford wants to dispel the notion that commercial real estate is a risky endeavour.

The founder of Successful Property Strategies is an adherent of “the McDonald’s strategy of business—they’re more in the real estate business than the hamburger business,” and owns three commercial properties worth $14.5mln that have only $1.68mln left of repayment. He understands the reticence people have towards commercial real estate, but says, if done properly, it can yield substantial returns.

As an overture, Beckford—an investment coach and author of four books about small business and business coaching that have been translated into nine languages—says that owning commercial real estate is much less cumbersome than owning a residential property and renting it out, because of the quality of tenants and the leasing structure.

“One of my tenants is the federal government of Canada,” he said of the Services Canada office in his building. “That lease is worth about $1.3mln in payments. Other tenants signed five-year leases with five-year renewals. In their previous office, Service Canada was in that building for 26 years, so to have a single tenant who has the potential of that long of a lifespan is unheard of in residential.

“You’re also dealing with contracts, not people. That’s huge because when it comes to people having horror stories with bad tenants and bad management, the courts side with the tenants because they think they’re being taken advantage of, but with commercial properties, you’re dealing with 30-, 40-page contracts that clearly define everybody’s responsibilities and rights, and courts typically side with the landlord. But usually it doesn’t get to that because the lease is so defined. With residential properties, even if the tenant is doing something illegal, or borderline illegal, you can’t evict them because it’s their home, but with commercial you can lock the doors.”

Beckford has heard time and again that commercial properties are too expensive to buy as investments, however, unbeknownst to most people, the Business Development Bank of Canada loans considerable sums of money for commercial property ventures.

Coupled with the fact that a commercial landlord is responsible for much less than a residential landlord—including maintenance and property taxes—Beckford calls it a no-brainer.

“In commercial, maintenance is the responsibility of the tenants. If it’s inside the space, they’re responsible, whereas with residential maintenance, it falls on the landlord. The commercial tenant pays their share of property taxes, too, so you’re protected against your cost increases.”


Related stories:

Post a Comment

Most Trending News

The best place to buy a rental property in Canada: 2021

You want the biggest bang for your buck so here are the best places in Canada to buy a rental property, and the best types of properties (including vacation homes!).

Read More
Strategies to Predictably, Reliably Grow Your Real Estate Business

This 7-day free masters summit will provide you with all the tips and tricks you need to get started in real estate investing, how to expand your real estate portfolio, and much more.

Read More
June virtual conference promises to turn agents into millionaires

“The easiest way to prove to people you can help them is to just start helping them, no strings attached,” said Craig Proctor, the master realtor who revolutionized the team concept.

Read More