Commercial real estate in Montreal

Good afternoon Quebec mortgage and real estate world. This week, I had an informal chat over coffee with Ron Wiebe from Ron Wiebe Realities. Ron's real estate agency specializes in commercial real estate and commercial leasing. As many of you know, commercial is an area that I am always interested in. Often, I feel I juggle residential and commercial real estate as many of clients own both types of property.

Ron and I launched into our chat by talking about new and seasoned commercial properties owners. I am always interested in servicing both types of clients especially folks that have a decent portfolio of residential properties and are looking to dive into commercial or their business needs them to expand to a commercial property. Ron shared with me that most people starting out a new business will typically lease some space before buying. Once the business becomes stabilized then you may be interested in finding a mortgage with similar payments as your lease. Ron says that "your first commercial building is the trick." He suggests that you plan 6-12 months in advance of buying. The most common mistakes is that people undervalue property and most do not realize that you may need 25-40% down payment on a commercial building. The type of building and revenue versus expenses will typically dictate amount of down payment required. Each bank and lender is slightly different.

Ron's main theme to keep in mind whether new or a veteran to commercial real estate is to "be pragmatic" and listen to your commercial real estate broker. If you trust your broker then listen to their advice and you may need to adjust your expectations. I agree with Ron that times change, meaning property values change as do lending rules. What you paid for years ago by square footage has changed. It is most likely inevitable. Having said that, Ron suggests that commercial market value will always be there. If permitting you should will always be looking to invest or operate your company somewhere you can call your own.

For more questions or comments about commercial financing feel free to contact me. Also, if you think of someone that might need my services please help make that introduction and let's start that conversation.

Harder to get a mortgage in 2015?

I wanted to wish everyone a happy 2015. I've been a bad boy as I need to get more consistent again with this blog. I must give credit to one client in particular that called me last week and mentioned that he reads my blog often. I was very touched by that comment. So this blog entry is dedicated to him. Thanks for the kick in the butt.

Okay now for the crux of this blog, is it harder to qualify for a mortgage in 2015? I am not trying to be evasive but I would say it depends:

1. If you are looking for a residential mortgage : it is not harder to qualify for a mortgage as the rules are generally the same. I would say that banks and virtual lenders are clamping down on poor credit and forcing self employed people to declare more money. The Federal Government is still closely monitoring the banks in this respect. We still have some wiggle room but this trend is forcing the  average consumer to "play more by the rules." I refer to this as common sense mortgage financing.

I find usually where the wheel fall off the wagon is due to personal issues such as divorce, illness, a death etc. I am optimistic for 2015. My two cents is stay proactive with your properties, credit, taxes, investments. Also, if a problem arises then deal with it immediately through a mortgage broker. Often times proper problem diagnosis, planning and execution is what is necessary. You need a power team consisting of the right: mortgage broker, financial planner, insurance broker, real estate broker, and accountant.

2. If you are looking for a commercial mortgage: I would say that commercial financing is more intricate. Each building is different and more and more banks are particular as to the type of properties they would like in their financing portfolio. Not everyone has a AAAA tenant from a large known franchise or brand. My two cents is just be sure you are approaching the right lender with your property or speak to a mortgage broker with commercial experience.

Also, often what slows financing or kills the deal with a lender is bad mortgage planning. Know your properties and know what your accountant enters into your T1 Generals. I worked on one commercial refinance where there were major dicrepencies on the rent roll and expenses. I try to pinpoint those issues before submitting to a lender but that is not always possible. For commercial mortgages, I am also very optimistic for 2015. I would say I have more commercial banks and lenders to work with than residential and these banks are hungry for business.