Are you looking ahead in your lease management strategy?
Renewals should be at the forefront of your mind.
A high commercial tenant turnover rate can leave a bad impression on a community. A perception sets in when a commercial space is often vacant; financial health will read low to residents, prospective buyers, and tenants.
Thus, it's critical for commercial real estate investors to do their research when:
- Selecting properties to purchase
- Identifying the right locations
- Screening for commercial tenants
When you consider the above points, it's much easier to streamline lease management and secure renewals from strong small businesses.
Here are a few tips to remember when managing lease agreements for your portfolio.
Hire a Property Manager Right Away
The first thing you need to do is hire a property management company. Don't wait until after your first commercial purchase. Consult with a company before starting your search.
You can always schedule an initial consultation to discuss your goals for commercial real estate investing.
You'll get a much clearer picture of the commercial property landscape, including:
- Strengths
- Weaknesses
- Opportunities
- Threats
The above points are necessary for conducting a SWOT analysis. This step is standard for any person making a large investment, whether it's an entrepreneur starting a business or a real estate investor purchasing an office building.
A real estate professional will help you make smart decisions every step of the way. This includes choosing the right property in the right location and marketing to the right tenant who can supply a demand in the community.
Legal Lease Terms
One of the biggest landlord mistakes is writing your own lease contracts. This decision is a recipe for financial disaster; the wrong tenant can exploit vulnerabilities in the agreement or breach their contract altogether. This threat is another reason to work with a property management company from the beginning.
Property management companies have legal experts who write and review lease contracts. These contracts are written through the lens of the city's current lease laws.
A strong lease contract should have the following points:
- Monthly rent amounts
- Maintenance and upgrades
- Tenant and landlord responsibilities
- Terms of evictions (and eviction processes)
- How property utilities are handled
- Lease renewal terms
- Local lease laws
- Landlord and tenant rights
- Rent increase protocols
A prospective tenant should review the lease with a property manager present. Asking questions during this process is highly encouraged to avoid any early lease-breaking.
Lease Management and Renewals
Communicate upcoming lease renewal windows well in advance. A property manager can also work with excellent tenants on lease negotiations; this is a good way to maintain strong landlord-tenant relations.
A lease negotiation may include a rent discount for the first month if applicable, or special upgrades to a commercial kitchen or lobby area.
Make Smart Leasing Decisions
Remember the above points moving forward in your lease management strategy. Work with a property manager from the start. Only write a lease with a lawyer and have a renewal strategy ready.
PMI Property Alliance is a team of property management experts committed to the growth of the city's business community. We leverage the latest real estate technology to maximize investor returns.
Schedule a consultation to start scaling your commercial property portfolio.
