A real property report is a legal document akin to a map of your property, showing boundary lines and improvements identified by a surveyor. This document is legally binding, and can protect you from future legal liabilities, especially in the cases of intrusions and bylaw violations.
A mill rate (or millage rate) is a figure used to calculate the tax payable per dollar on an assessed property. The mill rate represents the dollars that you will pay in property tax on every $1,000 of the assessed property. To calculate property tax, multiply the assessed value of the property by the mill rate and divide by 1,000. For example, if Grande Prairie’s mill rate is 15 and the assessed property value is $100,000, the property tax bill is $1,500.
The current mill rate is determined by the municipality. You can find the Grande Prairie Municipal Mill Rate on the Government of Alberta website.
Just as you would get an inspection done before buying a new home, you should ensure a commercial property inspection is done before signing an agreement. A property inspection will tell you if there’s glaring issues that need to be solved, such as a leaking roof, heaving floors, or cracks in the foundation. Knowing the current state of the property can save you the time, money and headache that comes with unwelcome surprises.
A commercial gap analysis is a data-driven report of commercial real estate markets: it calculates the difference between property supply and demand in a given area (such as Grande Prairie). By looking at a current gap analysis, you can identify future opportunities in office, retail, industrial and bare land real estate. A gap analysis is a handy tool that can inform your property investments and keep you from sinking your money in a shrinking market. See my Real Estate Resources section for the latest Grande Prairie gap analysis reports.
A cap rate, or capitalization rate, is the percent return on investment rate of your commercial property based on the revenue your property can generate. To calculate your cap rate, you’ll need to know your net operating income (NOI), which is all of your revenue minus your operating expenses. For example, if your retail buildings were a $1,000,000 investment and you can get $100,000 in revenue (NOI), your cap rate is 100,000/1,000,000 or 10%. The higher the cap rate, the higher the return on investment. You can find NOI and cap rate calculators on the Real Estate Resources page of my website.
It’s sometimes the case that when an individual or company is selling a building, they do not want it to be publicly listed. This can happen for a variety of legitimate reasons. For example, if a business owner knows their building will take two years to sell, having the property listed publicly may reduce the value of the business during its last two years and reduce the amount he or she can sell it for. When a listing is off-market, a realtor shares the real estate opportunity directly with bigger buyers in the region who may be interested, while keeping the listing respectfully quiet.
Realtors are typically not licensed to sell businesses. You rely on a realtor to be an expert in their field; similarly, you should rely on a licensed professional when it comes to selling your business with an expert. If you’re looking to sell your business in Grande Prairie, you can talk to local experts at Sunbelt or MNP.
Both buying and leasing commercial real estate have advantages, and the right choice will vary for each business. When you buy commercial property for your business, you diversify your assets, moving capital cash out of your business into real estate. Some businesses choose this route so that their real estate can work as a financial safety net should the business face hard times.
Leasing commercial real estate allows businesses to keep that capital cash and instead invest it in the operation of the business. When it comes to leasing versus buying real estate, there’s no correct answer. It depends on your business, goals and finances. Talk to your accountant to know your business and then find the right fit with a good realtor.