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First purchase

Buying your first commercial property in British Columbia

The building is the easy part. The financing runs on rules nobody explains until you are already committed.

The short answer

The financing works differently from anything you have done residentially, the diligence costs real money before you know whether the deal is approved, and the two things that most often catch a first buyer are the size of the equity required and the length of the subject removal period they agreed to.

  • Budget for third party reports, legal and appraisal before approval, not after.
  • Agree a subject removal period that matches how long commercial financing actually takes.
  • Expect to give a personal guarantee.
  • The building's income, not yours, sets the loan.
Halftone illustration of a small commercial building with a key beside it.

The order of operations nobody explains

First, get a realistic sizing. Before you write anything, find out roughly what the building supports and what you would have to put in. The commercial mortgage calculator gets you close on your own, and a deal review gets you a broker's read with no credit check and no cost.

Then write, with a subject removal period that fits. Not the one that makes your offer look competitive. The one that matches how long a commercial mortgage actually takes. This is the cheapest decision on the whole file and the most expensive one to get wrong.

Then order the reports, once the deal is firm enough to justify the spend. Reports get ordered when there is a lender and a structure worth spending against. Ordering early feels productive and is usually just money spent before you knew whether the deal was real.

What it costs to find out, before you know the answer

A commercial appraisal from the lender's approved panel. An environmental report on most files, and on some property types a Phase II after it. Sometimes a building condition assessment. Legal on your side and the lender's legal on theirs, which you also pay for. And your own time, which is not free either.

We do not publish figures for any of it, because the numbers move with the property, the complexity of the assignment and how busy the panel is, and a made up range would be worse than no range. What is certain is that these costs are real, they land before you have an approval, and they are not refundable if the deal dies.

That is the entire argument for getting a read before you spend. Send us the property and the numbers and we will tell you whether it is financeable and roughly what it costs, at no charge, before you commit a dollar to reports.

The two mistakes we see most

A subject removal period set to a residential timeline. Two weeks is a normal residential condition period and an impossible commercial one. The appraisal alone can take longer than that to order and deliver. When the clock runs out you are choosing between removing subjects without financing in place and asking the seller for an extension you have no leverage to demand.

An equity assumption borrowed from residential leverage. Commercial equity requirements are a different order of magnitude, and they vary by asset type. Read the down payment page before you set your budget, not after your offer is accepted. A buyer who planned on residential leverage discovers the gap at the worst possible point in the deal.

What being a first time buyer does and does not cost you

Lenders do look at experience. On a complex asset, a repositioning play or anything with a management burden, a borrower who has done it before is a materially easier file, and a first timer will feel that in the questions and sometimes in the terms.

But inexperience is a factor, not a disqualification. A first time commercial borrower with a strong property, real equity and a clean file is financeable, and that describes most first purchases. Where it does weigh, it can be offset: a partner with a track record, a professional property manager, a stronger covenant on the lease, or simply more equity in the deal.

What does not help is arriving unprepared. The fastest way to look like a safe first time borrower is to hand over a complete package. The deal submission checklist is the list.

FAQ

First purchase questions.

Yes. Lenders look at experience, but a first time commercial borrower with a strong property, real equity and a clean, complete file is financeable. What inexperience does is raise the standard of everything else. The property has to stand up on its own numbers, the documents have to be in order, and the story has to make sense. Nobody is going to approve a marginal building because the buyer is enthusiastic.

Long enough for commercial financing to actually happen, which is a different length from anything you have used residentially. A conventional file commonly runs 45 to 90 days from application to funding and an insured file runs longer. Work backwards from that, add room for the appraisal to be ordered and delivered, and do not let a listing agent talk you into a residential timeline. Our timeline page breaks the stages down.

It is a factor, not a disqualification. Where a lender is uneasy, the usual answers are a stronger property, more equity, a property manager with a track record, or a partner or covenant that brings experience to the file. On a straightforward, well tenanted building, being new matters far less than most first buyers fear.

An appraisal, usually an environmental report, sometimes a building condition assessment, and legal on both sides. We do not publish figures because they move with the property, the assignment and how busy the panel is, and quoting a number here would mislead you. What matters is that the money is real, it is spent before the answer arrives, and it is not refundable. That is the whole argument for a deal review before you spend it.

That is a question for your accountant and your lawyer, not for a mortgage broker. It turns on tax treatment, liability, your other holdings and your succession plan, and the right answer differs from one buyer to the next. What we can tell you is the financing consequence: a holding company purchase is entirely normal in commercial lending, and it does not remove you from the file, because most conventional lenders will want a personal guarantee either way.
Keep reading

Related reading

Commercial versus residentialWhat actually changes when a mortgage crosses into commercial underwriting.How long it takesA stage by stage timeline so your subject removal period is realistic.Down payment by asset typeEquity requirements and the ways a gap can be bridged.Buying a building for your businessOwner occupied purchases, company structures and when leasing wins.

Thinking about your first commercial building?

Send it before you write. We will tell you what it supports, what you need to put in and how long to give yourself.

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