“It sure is nice to pay yourself and not a landlord. When my partner, Lori Billey, and I founded our marekting agency RED in 2001 and were looking for space in Edmonton, we wanted to own the building. That would give us the security of an asset we could sell if the space no longer suited our needs. And there was probably money to be made as the building appreciated in value. So, it really didn’t seem like a risk.
The hardest part of buying a building is usually the down payment, which is typically 30% to 40%. But this property was brand new, the developer wanted to move it and the Edmonton market was soft. So, the developer agreed to lease us the property and delay the transfer of ownership for 18 months, giving us time to come up with the down payment. The lease eliminated the developer’s carrying costs—and gave it a guaranteed sale.
Before buying your building, you have to do a cost-benefit analysis of buying vs. leasing, and the costs don’t necessarily go up and down together. You also need to be sure that lots of other businesses will be interested in buying or leasing your building if you decide to move.
Lori and I each own 50% of a real estate holding company we set up to buy our first unit for $212,000. As RED grew, in 2005 we bought the unit beside it for $340,000 and a third unit for $515,000 in 2007, then knocked down the walls to turn it into a single building. The market has really gone on an upswing, although Edmonton is not overinflated like some other markets. Our building is worth about $2 million, and we have monthly income from RED’s lease. So, I feel pretty comfortable with this investment.”