Residential properties and commercial properties share some similarities. They both involve tenant management, maintenance, and more, but what sets commercial properties apart is that they tend to be more challenging. As a commercial property owner, you will have to worry about more matters, as you’ll be managing a massive property with tons of tenants. With those tenants come multiple complaints, concerns, etc. that can stress out even the most seasoned real estate investor.
If you’ve chosen to buy a piece of commercial real estate, we’ve put together a couple of helpful tips below:
#1 Use Commercial Property Management Software
One of the greatest challenges of managing commercial real estate such as an office, shopping center, etc. is managing information. From rental income rates to rent payments, there’s a lot to keep track of. It can often feel like an impossible task, particularly if you perform it manually. That’s why property owners and property management companies invest in property management software. It allows them to manage their files, information, etc. better so that they can make sound business decisions each time.
#2 Pick and Choose Your Tenants
When choosing whether or not to rent to a particular commercial tenant, take into account how well that tenant will mix with the existing tenants. If you were to rent to multiple tenants of the same “type” (tenants who sell similar goods/services) and lump them together, you may end up forcing them to fight against one another for earnings. As a result, your renters will have a difficult time paying their rent on time, as they aren’t making sufficient money.
With that said, it’s critical to balance the type of businesses that are nearby one another. For example, it wouldn’t be advisable to position two cafes next to each other.
If you aren’t sure how to position your tenants in your property, consult a commercial property management firm. They can help you decide on the proper placement.
#3 Prepare For Vacancies in Advance
Always remember that your tenants can choose to end their rental contracts. For whatever reason, they may not want to renew for another year. For example, they can decide to relocate to another commercial property for tax reasons, or they may need to put an end to their operations. Unfortunately, replacing commercial tenants isn’t as easy as replacing residential tenants. People will always need somewhere to live, but not everyone needs a space to start a business. That’s why it’s important to plan for potential vacancies in advance.
Sit down with your tenants months prior to their contract’s termination date, and ask them whether or not they plan to renew. If they don’t intend to renew, ask them why. You may be able to convince them to stay by providing certain property improvements.
However, if they’ve truly decided not to renew, you should start promoting the space and showing it to potential tenants (with the current tenant’s permission, of course). It will likely take your replacement tenant months to relocate, so start the process early.
#4 Draft a Fool-Proof Lease Agreement
Get a commercial property management company to draft a fool-proof lease agreement for you. The lease is an integral part of the tenancy, as it’s what will safeguard you and your property if your tenant sues you. As you negotiate the lease agreement, you should get legal counsel to ensure that you cover every potential situation.
Be sure that the rental contract clearly outlines each party’s responsibilities. For example, it should state who is responsible for cleaning the common areas, when tenants are expected to pay their rent, and how rent is supposed to be paid.
#5 Stay on Top of Maintenance
Do not overlook the importance of property maintenance. Failure to maintain the property’s condition can make it look worn out – the worst part is that when this happens, your tenants won’t be happy about it, and they’ll be more likely not to renew. After all, no one wants to do business in a shabby-looking building.
As a real estate investor, it’s your responsibility to ensure that every inch of your commercial building is well-maintained. Here are a couple of ways to make sure you stay on top of upkeep:
Inspect the Property Regularly
By conducting a walk-through each month, you’ll be able to make sure your building is always well-maintained. A property inspection will allow you to pinpoint potential problems and deal with these issues as soon as possible. A property management company can assist you in conducting a comprehensive inspection of your commercial real estate investment.
Focus on High Foot Traffic Areas
What sets commercial properties apart is that they’re not only visited by tenants but by guests, too. With that said, the foot traffic will be a lot busier. There will be new individuals walking through the building every day, which can cause the flooring to get worn out. That’s why it would be best to concentrate your inspections on places that people use the most.
Deal With Property Damage Immediately
It can be tempting to postpone minor repairs until they worsen, but by doing this, you’ll probably end up spending more money. Deal with the damage that you discover immediately. Don’t wait for things to get worse.
Follow the Local Building Code
It is non-negotiable for your building to be up to code. Partner with a commercial property management company to ensure your structure always complies with local construction codes. If your building isn’t up to code, you could end up in legal trouble.
The Best Way to Manage Commercial Properties: Hire a Property Manager
Commercial real estate can be the cause of headaches. It’s a challenging undertaking, which is why it’s a good idea to delegate property management tasks to the pros. When you partner with a commercial property management company, you’ll be able to relieve a bulk of your workload. They understand the industry inside and out and know how to make the most out of your property. Not only will your property receive expert care, but you’ll also be able to maximize your investment – that means you’ll make more money!
Whatever kind of commercial real estate you own, work with Luxury Property Care. Our experts will make sure that your property is always well-maintained, that your tenants stay satisfied, and that your property continues to attract visitors year-round.