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Buying Commercial Real Estate with No Money Down: Is it Possible? Is it Advisable?

There are many reasons to quickly jump into the commercial real estate market. Perhaps it's a great business opportunity, a sudden need to move or a fantastic location that has just hit the market. In these scenarios, it may be tempting to consider buying commercial real estate with no money down. However, it’s always wise to move with caution when making huge financial decisions.


Securing Financing


Unless the business has a surplus of cash, secure and reputable financing will need to be secured. To avoid dealing with banks it may be tempting to seek a friend or family member for help with a loan. Be very cautious as this may put unnecessary strain on personal relationships. An alternate route could be a private investor who has confidence in the potential of the company and is able to cover the amount of the deposit.  More likely, businesses must approach a financial institution.


In most cases real estate mortgages work similarly to residential ones. More often the perceived risk is higher, therefore the terms can be highly variable. The property will be the collateral in the mortgage so the terms will depend on the type of property and the risks they present such as:


  •        Construction projects
  •        Apartments
  •        Offices
  •        Industrial
  •        Manufacturing
  •        Agricultural
  •        Commercial
  •        Hospitality


Generally, banks or mortgage brokers will not post commercial interest rates as there are so many variables in these types of transactions; such as the financial health and experience of the business.  When attempting to buy with no down payment, it may be tempting to approach a broker who can do some fancy financing with multiple lenders. Be wary of any transaction that may have an extremely high interest rate and prohibitive terms. Always have a professional accountant and legal advisor explain the implications of such an agreement.


Approach a REALTOR® Experienced in Commercial Real Estate


It’s important to have a licensed real estate agent with up-to-date knowledge of the market. The Canadian Government is constantly keeping an eye on overheated markets and regulations to govern them, particularly in the area of foreign ownership. A REALTOR® can help guide buyers through the mountain of information.  A good place to start the search for the right REALTOR® is the Canadian Real Estate Association. CREA licenses, educates and regulates real estate brokers.


According to CREA, an accredited commercial REALTOR® should be experienced in buying, selling or leasing property. In addition, they should also understand space planning, zoning by-laws, municipal regulations, tax implications, environmental regulations and appraisals, as well as the ins and outs of financing. All members of CREA adhere to a strict Code of Ethics and Standards. There are many reputable brokerages in the Greater Toronto Area but always look for experience and personal service. One of the smaller boutique firms getting high reviews, is JN Asensio Realty which offers both residential and commercial services.


When considering buying commercial real estate with no money down, make sure to be fully aware of the financial implications. Have a professional business statement drawn up, along with a solid business plan. Any investor whether it be private, personal or public will want as much reassurance as possible before agreeing to lend large sums of money.