How to be a landlord of commercial property

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How to be a landlord of commercial property

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As landlord of a commercial property, you’re faced with a challenging task, but it can be a profitable task, if done correctly. If you own an office building, retail strip, hotel, restaurant space or warehouse, you may want to save the fee paid to a property management company and manage the building yourself. There are many details to consider, but once you understand the basics, you’ll have a good foundation from which to run your commercial property.


Step One

Calculate the rent per square foot for your building. Look at ads for space in your area, and visit these properties to compare them to your own. Call listing agents to ask for the average price of similar buildings. Review current leases to determine if they are at market value.


Step Two

Add the triple net (NNN) and common area maintenance (CAM) fees to the cost of the lease. NNN is an additional expense where the tenants pay their portion of the property taxes, insurance and CAM, such as elevators, hallways and parking lots. CAM is calculated by dividing the tenant's space by the total amount of leased space available.


Step Three

Prepare a lease agreement, with the help of a real estate attorney. Your contract should include details such as cost per square foot, total rent, term (length) of the lease, NNN and CAM, who is responsible for which repairs, who pays for any remodeling before move-in and the percent of rent increases per year -- if any.


Step Four

Advertise any vacancies that you have in your property. If you know that a tenant will be moving out at the end of the lease, advertise for new lessees 12 months before the expiration. Placing a professionally made sign in front, and an ad in the local newspaper, should yield inquiries. Also, advertise on websites, such as LeaseMLS, to reach a wider market (see "Resources"). In addition, mail flyers to tenants in buildings around yours. They may want to move, once their lease expires.


Step Five

Require that all companies interested in leasing space complete an application. Review these carefully, and check the credit and background of each business, along with the principals of the company, using a service such as Abika .


Step Six

Meet with the new tenant to sign the lease agreement. Ask for a personal guarantee from the tenant, which consists of a form that allows the landlord to collect from the tenant's personal assets if the business is unable to pay the lease.


Step Seven

Use rental management software, such as Rent Is Easy, to keep track of rent payments, lease expirations, expenses and deposits, especially if you have many spaces in your building.


Step Eight

Keep the lines of communication open with your tenants. Ask them if there's anything they need from you. Not hearing from tenants doesn't mean that they're content. You may be able to retain more lessees by regularly touching base.


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