I recently returned from a Real Estate Investment Network (REIN Canada) sponsored Multi-Family Real Estate Workshop. While REIN has typically focused on educating new and experienced investors on various smaller property investment techniques, this event was requested by REIN members who are seeking to add apartment buildings to their portfolios.

Don Campbell, and an impressive line-up of top investors and experts, produced an excellent workshop full of real life examples, technical tools and evaluation techniques enabling the over 700 attendees to see the nuances and potential upsides of apartment investing.

I have read that 7 out of 10 millionaires have made their money in real estate but that the truly wealthy investors focus on commercial real estate, in particular multi-family properties (also known as multi-units or apartments).

Clearly from the REIN workshop, and my own studies, investing in apartment buildings can be a daunting task. If you have invested in small single family homes to say 4-plexes you will find the process of buying a commercial apartment significantly more challenging on numerous levels.

Sticker shock will be the most obvious, not so much the per door cost (price paid per each unit in the apartment) but rather the upfront costs of acquisition. Loan application fees can be substantial along with building inspection costs, environmental reports, engineering reports and the list goes on. But don’t let this scare you as these are just the cost of doing business and are certainly calculated in your financial analysis of the opportunity.

Clearly investing in apartments requires a whole new level of thinking and certainly a different level of experts on your team. Your lawyer should be well qualified in both commercial real estate and relevant incorporation strategies. Your financial wealth advisor and/or accountant should have relevant experience with financial analysis and tax strategies around apartment holdings.

You will need a skilled building inspector and engineering company to aid in the physical evaluation of the building (their reports are very important in your negotiations with the seller). An experienced “commercial” mortgage broker with multiple sources of money for deals is essential. Clearly with a personal bias, a full-time “commercial only” Realtor who is also a real estate investor is needed for initial searches and evaluations as well as coordination and negotiation.

Whether you are a novice investor, a seasoned property owner, or you are just looking for alternate investment portfolio opportunities, educate yourself on multi-family investment opportunities as they may be your path to real wealth. In all transactions use your qualified professionals for advice.

In future post we will look in some detail at the opportunities and techniques of multi-family investing. I encourage you to assemble your team, start your research and make informed decisions.

Guest Blog Post by Darrin Garman, CCIM

One of the things that I hear over and over again is how bad the real estate market is.  For example, just heard a few days ago that home sales are down 27% (in the USA) – largest in history I think.

I am not surprised.

In this email I don’t plan on getting into the “why’s or why not’s” of this, rather, I want to answer the question that I think is at least in the back of most people minds right now.

IS REAL ESTATE A GOOD INVESTMENT RIGHT NOW?

My answer:  IT DEPENDS!! 

Ok, let me be clear.  I think it depends on where the property is, the dynamics of the property and the local marketplace.  I know this is a general statement and there may be other factors for sure, but it does depend on what is going on locally.

For example, I own an apartment property in a very small community where the largest employer right now is laying people off.  Do you think that I am looking to buy another property right now in this community?  Of course not – right now is not the time.

Maybe if the price I could pay could be discounted so much for this THEN I might look and weather the storm but in an every day situation – probably not.

OR…

I just purchased (with partners) a large project in a great location, in good condition in an economically vibrant community that has a terrific track record and room to realistically raise the cash flow even higher.  This was a no brainer for me – even in a time where many say that real estate is not a good investment.  This one will be a big, big winner.

So, there are definitely areas you want to avoid at this time, no doubt about it but it is not a situation where you want to avoid ALL of it because there are some nice projects that can be had right now

- IF – you know what to look for.

More on this in future guest posts.

Have a great day.

Darin

While commercial real estate soars in first half of 2010 according to CB Richard Ellis in its Midyear National Investment Report (MNIR), optimism drops slightly from Canadian commercial real estate leaders according to the 2010 REALpac / FPL Canadian Real Estate Sentiment Survey (CRESS).

There were $7.8B in deals done from January through June of 2010, compared to only $4.9B during the same time period in 2009. The MNIR states, “When comparing the current national mid-year figure to mid-year 2005 – a year more reflective of the country’s normal commercial real estate activity levels – volume is up by 22.8 per cent.”

Real estate investment trusts and local private investors were the key drivers in the upswing while foreign investors played a minor role. REIT and private investor groups have been very active in the Toronto commercial real estate market but the MNIR report shows activity has been up all across Canada. It appears that investors were looking for tax shelter opportunities to hedge the lingering effects of the recession. This seems like a good move within the first half rebounding economy.

Meanwhile the CRESS “sentiment survey”, which captured the thoughts of senior real estate executives, such as CEOs, presidents, board members and other executives from a wide range of industry sectors, showed slight declines both in Canada and in the United States.

Despite the seemingly stabilized markets in the first half, optimism going forward has waned to some degree. Asset values have climbed but the survey show there are still questions of sustainability going forward. Debt capital availability remains cautiously positive as most respondents expect conditions to remain stable or perhaps improve slightly.

The good news for real estate investors is that the majority of the survey participants believe that equity capital will remain available and stable over the next several months.

Sources for this update were:

globeandmail.com

Aug 16 2010
Section: Business
Byline: Steve Ladurantaye

August 10, 2010
CNW
Posted by Alyson Fair in Commercial.