Don’t Make These 5 Mistakes When Leasing Your Commercial Property

Landlords have the most negotiating power when leasing to tenants in a retail, office, or industrial space.

While negotiating can be difficult, if you have the right commercial real estate broker in place, you will find that the process can be simplified by having the right objectives.

The objectives of a tenant and the objectives of a landlord are on opposing ends for almost every aspect of lease negotiating.

While your priorities throughout lease negotiation as a landlord should be clear, you need to avoid these 5 mistakes you should NEVER make throughout the negotiating process.

MISTAKE #1: Failing to Negotiate The Terms of The Lease Concisely

If you continue to go back and forth with the tenant on lease terms, not only will it delay the process, but it will also complicate things. Having one to two meetings to negotiate the terms of the lease will streamline the process and allow for less wasted time between the landlord, tenant, brokers, and attorneys.

MISTAKE #2: Not collecting rent soon enough

You have to make clear when the tenant is to start paying rent. Think about the needs of the property when it comes to expenses. You don't want to go 4 months without getting any rent if the tenant only needed 2 months for tenant improvements.

MISTAKE #3: Not checking the tenant's financial situation

Your lease should require the tenant to provide financial statements, and you should collect corporate tax returns dating back 2-3 years, to help you determine whether the tenant is in a strong financial position. A good tenant will have a stable income, valuable assets, and significant credit lines with good payment history.

MISTAKE #4: Being ignorant of market rents and rates

Working with a commercial real estate broker can ensure that you set your terms at market price. Not having someone to guide you through setting up these amounts can hurt you and your property. If you set the rent at a lower than the market price, you risk not hitting your break-even target. Setting your rents at a higher than market price will make your property less appealing and competitive. Not to mention, you will have a higher rate of vacancy.

MISTAKE #5: Not having enough long-term leases

If most of your tenants have short-term leases, this will increase the likes of your property having more vacancy rates over the holding period. Your property won't be as financially strong, and it will be less attractive to lenders during the financing. This is why it is important to make sure you have tenant leases that are longer than three years.

Being a landlord requires you to be alert and on top of your numbers. It is your property after all, and you have to make sure that all areas are being covered. A commercial property requires attention to detail, both upfront and throughout the process of holding a tenant.

Make sure to connect with an experienced commercial real estate broker that will guide you through this process and guarantee that all bases are covered so you can protect your property's financial future and stability.

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