Renting Out Commercial Property Needs Knowledge and Understanding

Commercial property investment was, is and will always remain as the most prospective investment options for investors. However, the most important thing for an investor is to ensure that he is using the right strategies for renting out his commercial property. Well, it has always been said that residential property involves easier steps in comparison to commercial ones. In fact, one must have a deeper understanding of each and every aspect of commercial properties, right from signing a lease to looking for a tenant. Actually, there are lots of other factors where the investor must be aware of like agreement types, legal expenses in regard to leasing, type of tenant to consider and more.

Now, it is also true that there are common points between a residential and commercial property. One, for instance, is looking for a good tenant. Rather, it is considered to be the first step in leasing a commercial property. Well, it has to be said that half of your job will be done if you can find tenants you already know beforehand. By talking to an agent, you can get contacts of many reliable tenants who can prove to be fruitful for your investment. However, if you are not able to find anyone, you need to know the screening process of finding out a suitable tenant. Here also, you can talk to a professional agent and he can make your job a lot easier. He can reach out to multinational corporations and corporate tenants.

Next, if you are aiming to lease out your property to big corporate houses, talk to international property consultants. One of the biggest advantages of dealing with them is that they have a global mandate with such organizations when it comes to leasing requirements. Furthermore, when you lease out your property to an MNC or any corporate tenant, you will have lesser chances to fall prey to lesser terms and conditions.

The most profitable part is that these companies usually agree to go for long-term leases and also fail to miss out paying rents. Despite, if you are the commercial property manager, you must always do thorough research and should always check their monetary records. No matter how big they are, it would always be advisable to check their credit history to find out if they have maintained a good record earlier. So, always go through their balance sheet and other monetary ratios to ensure if the company is really enjoying a stable economic condition.

Another important factor that commercial property managers must be aware of is making smart and timely negotiations. In fact, the best thing is to decide from beforehand on specific terms and conditions prior to finalizing a deal. Some of the important aspects of commercial lease transactions are:

  • Rent clause
  • Lock in period
  • Exit clause
  • Escalation
  • Hard options
  • Assignment rights

Apart from these, there are other periodical outgoings in relation to commercial properties like:

  • Service tax
  • Property tax
  • Maintenance charges
  • Tax deduction

The landlord usually pays the property taxes while the tenants bear the building costs as per the market price. Both TDS and service taxes are applicable on rent, which is usually borne by the tenant. Now, another important factor to consider is when to sign the agreement. After the tenant is finalized and all the terms and conditions are discussed, the lease is signed. However, different places have different ways of signing up a lease. Therefore, it is very important for the commercial property manager to find out the terms and conditions applicable to his state. Once he comes to know, it will be easier for him to proceed with the deal.

Finally, comes registering the lease. This requires paying registration fees and stamp duty cost in the process of registration for a lease agreement. However, the tenants usually bear the registration costs as well as the stamp duty costs. On the other hand, if you want to take a shortcut and don’t want to take so much pain, you can always talk to commercial property agents who will take up all such initiatives and involve you only when you will be required.

It’s still advisable for all property managers to gain a deeper understanding and knowledge of commercial property and proceed accordingly. It’s a matter of huge investment and one who stays ignorant or keeps no knowledge at all must not go for commercial property management. The more focused you are, the sharper is your presence of mind and the better will be your property dealings.

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