Q&A: Gateway to commercial closed CHAD ROBINSON, Broker, Mortgage Architects 360 Best Interest Mortgages
With a dearth of small multi-family property deals, brokers hoping to use them as a stepping stone to industrial and retail commercial have their work cut out for them. One specialist in the area explains CMP: Some brokers have reported a dearth of deals when it comes to four-plexes, triplexes and small apartment buildings. What is that owing to? Chad Robinson: There aren’t a lot of deals out there because no one is funding them. The banks have tightened up so much that it’s making it very, very difficult to finance them. We’re using a lot of the B lenders, so there’s a lot of consumer misunderstanding – they’re expecting 2.5% and they’re getting 4.5%.
CMP: How do you explain to clients that it’s still a good investment, even if they’re paying a higher rate? CR: It’s deal by deal. You have to look at what they’re buying, if it still cash flows. You need to analyse it: Are they making positive cash flow by the end of the year? Are their mortgages being paid down? If it is, then it should be a good deal. To give you an example, I had a client with a net worth of $4 million or close to it. She had perfect credit, but because she owned too many properties, she ended up with a B lender. She ended up going with the deal. She could have paid cash for it, but it was economically better for her to pay the higher rate than to just pay cash.
CMP: Do you see lenders loosening up a bit? CR: Not so. One of the CEOs I was talking to a little while ago said
Commercial brokers to cash in, in 2015 Morguard, a North American real estate and property management company, is forecasting a fourth consecutive year of “positive performance” in the commercial sector – despite the oil industry’s sluggish performance and its effect on the economy. “Investment returns will be largely income-driven, with some investors looking increasingly to new construction as a core strategy,” said Keith Reading, director of research at Morguard. “Boosting income performance will be a focus.”
rentals are such a small percentage of the market and it is such a high percentage of their defaults that it just minimizes their appetite for it.
CMP: Are there any opportunities to refinance these properties? CR: Not usually, unless they’re doing it to buy another property. But a lot of people who were in the A space are now squarely in the B world.
CMP: Is this discouraging investors from adding to their portfolio? Are clients choosing instead to renovate? CR: They are either renovating or not. I don’t think the current environment is affecting it either way. People who are renovating are doing that to stay competitive in areas that have higher vacancies.
CMP: So for brokers who’ve done a fair bit in terms of financing deals for smaller apartment units, is there opportunity to shift to industrial or retail commercial? CR: Yes, there is. But those are even harder. You really have to understand what you’re doing to get into industrial and some of the unique commercial properties.
Calgary commercial deals surpass $3 billion A sluggish economy hasn’t held commercial investors back, with oil country seeing a surge in commercial sales. “The last half of 2014 wraps a strong year for the Greater Calgary commercial real estate market and caps a healthy five-year run from the market adjustments experienced in 2009,” Paul Richter, director of research at RealNet Canada told the Calgary Herald. Several sectors enjoyed exponential sales growth, including apartments (up more than 35% to $253.5),
Price of Target store purchase revealed Landlords paid $138 million (pre-tax) to buy-back 11 properties that currently house Target stores in a deal that closed in early March. The deal was between Target Canada Co. and a number of landlords, including Oxford Properties and Ivanhoe Cambridge – two of Canada’s largest commercial real estate companies. In total, there are 133 Target stores expected to hit the market in the near future, representing plenty of opportunity for commercial mortgage brokers to help investor clients add to their portfolios.
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