Owning and leasing commercial property can be profitable and rewarding, or a mental and financial drain. Lessors and real estate investors know that, when done correctly, a commercial rental property can offer significant opportunities for cash flow and long-term appreciation. Whether you are a seasoned professional or a first-time lessor of a commercial property, it is essential to have a solid understanding of all that the job entails.
Overlooked legal details can be the source of frustration and expense. It’s crucial to have a clearly written lease agreement. A good lease should include the basics, such as the names of the parties, description of the property, the length of the term, lease amount, the due date and method of payment. Avoid any oral agreements. They aren’t worth the paper they’re printed on (although might be enforceable to your detriment under some circumstances). If a problem arises, you will have nothing to fall back on to defend your position.
Aside from the basics, spell out who will be responsible for maintenance and retrofitting if required. Who will repair damage to the property? What happens if a government agency takes the property by eminent domain? How will you maintain purchasing power in the face of inflation?
You may need to be familiar with building codes, land use issues, zoning regulations and a lot more. Be sure to consult with our office to ensure that all details have been attended to. Don’t be afraid to spend your money on things that really matter and will put you on a strong legal footing. For a flat fee, we can go over the details of your commercial real estate transaction and ensure that it is in your best interest.
Do Your Homework
Selecting a good tenant is crucial. A quality tenant makes your job easier and ultimately gives you peace of mind. A bad tenant can cost you valuable time, money and frustration. Take the time to do your homework. Remember that fully vetting a potential tenant is not invasive, you are wisely protecting your investment. Be sure to check references, do background checks and review credit reports. It’s always a good practice to meet your tenant in person as well.
Run It Like a Business
It is important to manage your property like a business. Avoid a casual approach, which can spell trouble in the long run. Always stay mindful to protect yourself and limit your liability. Create a business plan and consult with experts.
Be Prepared for the Unexpected
Often unwelcome surprises come by way of maintenance issues. One way to alleviate some of this stress is to ensure that you have a designated maintenance fund. Also, be sure that you have a set maintenance schedule which will limit the number of unplanned repairs.
The Golden Rule
Don’t treat your tenant as an adversary. Always keep in mind that tenants are people too. A lessor who invests in their tenants’ success will also reap the benefits. When you treat your tenants with kindness and respect, you are more than likely to get that in return. Don’t be casual with your responsibilities, and chances are your tenant will not be casual with theirs.