There’s really only one reason to buy commercial property – and that’s to make money. So, finding the right business to rent space from you is critical to your investment and your future. Before you hang that For Lease sign there are a few things to consider making sure you get the most bang for your buck!
Determine the Right Rate
If you price your space too high, you’ll miss out on viable tenants, but if you price it too low, you risk losing money. Neither scenario is ideal. An easy wat to help figure out the right rate is to do some research in the area. Ask other property owners or even tenants what they are paying for similar space that’s already occupied. You can also ask if there are any utilities included and if so, what they are. You may also want to find out if the lease terms are for one year or longer. Making your rental rates and lease terms attractive can make all the difference in getting your space occupied quickly—and bringing in money.
Make it Look Good
Try to view your space as an outsider. Does it have good curb appeal, is the entrance inviting, does everything function as it should? Does the interior look move in ready or will you be allowing the new tenant to choose the paint and flooring options? Depending on the functionality of your space, providing an allowance for improvements may increase your odds of finding a tenant that fits.
Consider Hiring a Pro
You can simplify the process by hiring a Realtor. Contracting with a local Realtor who knows the commercial marketplace can help you rent your space faster than trying to do it on your own. They can advise on any updates or improvements you need to make that will attract ideal tenants as well. It will cost you some money up front for their services, but the quicker the property is rented, the quicker you start making money.
Similar to residential renting, you’ll want to do a background check on the person responsible for leasing the space – most likely the business owner. You should also ask for past rent history, and the business financials as well as personal finances for the person signing the lease. You’ll want to do your due diligence to make sure the tenant and their business can afford the space and the utilities that come along with it.
Create a solid lease
Consider using an attorney to help you draft a lease. This will ensure you cover all your bases and don’t leave any loopholes that might allow the tenant to back out of paying you or causing any damage to the property.
High tenant turnover can affect your profit margin. Once you get a tenant that you like, pays their rent on time, and in turn has a successful business – you should try to retain them as long as possible. Consider a multi-year lease. If you need to do a rent increase, do it strategically. Give the tenant notice, and try to incorporate the increase over the course of a few smaller increases versus one large one. You should also perform maintenance or improvements to keep the building looking good. If your tenant’s business thrives in the space, they are less likely to look elsewhere.
Finding tenants for commercial space can be tricky. There are a lot of factors to consider, but it can be a very profitable investment. If you need help expanding your business or figuring out the next step – give us a call!
Margret K. Warner
Vice President, Commercial Lender
Director of Business Services