Can I rent my commercial property? Commercial property can be a great investment. You can invest in a building used for business or hold it for rental income. But if you’re not sure about investing in commercial property, renting might not be your best option either. After all, renting means, you don’t own the property and don’t have complete control over it. If you rent, you need to ensure that the landlord agrees to terms before signing the lease agreement.
This article will answer some of the most common questions regarding renting commercial property and provide insight into potential tenants and landlords. Read on to know more!
Can I Rent my Commercial Property?
The answer is complex. It is yes or not, but if you are the legal owner of the land you can rent it according to your local laws. There is no barriers doing it.
If you own your home, you can put it up for lease. There are various options, such as sub-letting or a long-term lease. You can also sell your home and lease the property. The main advantage of this is that you can continue to make your mortgage payments even if you are not living in the property.
You do not have to worry about selling your home and finding another one. There are various disadvantages as well. If you have family members who are dependent on you, they might not be able to relocate. If you have investments in other properties, you might have to transfer them to the new tenant.
What is a Commercial Property?
Commercial property is land that is used for business activities. It refers to buildings that house businesses but also relates to land, which is used to get a profit. Commercial property includes malls, grocery stores, industrial states, offices, manufacturing shops, hotels, farmland, warehouses, garages, and many more. It is also called commercial real estate, investment property, or income property.
Commercial Real Estate (CRE)
CRE is a property exclusively used for business-related activities, and commercial real estate is a commitment to tenants to conduct profit and earning activities. This broad real estate category can include everything from a single retail store to a heave manufacturing industry.
Categories of Commercial Real Estate
- Hospitality: Hotels, public houses, cafes, restaurants, amusement parks, sports venues
- Retail: Shopping malls, shops, retail stores, convenience stores, showrooms
- Office: Serviced offices, office buildings
- Health care: Medical centers, hospitals, nursing homes, dispensaries
- Multifamily: Multifamily housing buildings
- Educational: Schools, colleges, universities
- Industrial: Factories, warehouses, workshops, automobile repair shops
Commercial real estate can be divided into four or five main categories depending upon their use and function:
- Industrial use: These include heavy manufacturing industries or simple warehouses
- Multifamily/ rental: A go-between residential as well as commercial property
- Office: They are often classified according to business size
- Retail: Includes small shops etc. for housing mall businesses
- Mixed-use: These individual categories may also be further divided into different classes depending upon the building’s condition, aesthetics, and quality.
How to Rent Commercial Property
Here are the steps:
- Find suitable location
- Make Sure the Property Completes Your Need Cycle
- Be Aware of Hidden Issues When Viewing Properties
- Check for Lease Terms and Rent Increase Clause
- Understand the different types of Commercial Real Estate
- Conduct market research before you invest in rental property
- Invest in a property with all the right features
- Stay informed about the local rental market to find good deals.
- Inspect the Premises for Durability and Readiness
- Finding a trustworthy tenant
- Negotiating a fair deal
- Carrying out legal procedures
Find suitable location
The first step in finding the right commercial property is finding a convenient location for your business. Your company needs to be able to get to its real estate purchase quickly and easily. If you cannot do this, they may not be the right location for your business.
Think about what type of services or products your business provides. What locations would be best suited for them? Think about the hours of operation and how much traffic you would receive from people looking for your service or product. This can help narrow down the search for a suitable location.
Make Sure the Property Completes Your Need Cycle
The most important thing to consider when looking for commercial property is whether or not the property will complete your need cycle. To know if a property will fit your needs, you have to figure out your needs and how much money you can afford to spend on a new property. You also have to determine how long it will take for the investment to pay off and how quickly you need the return on your investment. What other factors should you consider when deciding whether or not a property is worth investing in?
Be Aware of Hidden Issues When Viewing Properties
When buying commercial property, most people are intimidated by the process. They worry that there may be hidden issues with the property they inspect. These concerns can make you postpone or cancel your purchase and ultimately waste money.
One of the first steps in finding a suitable property is to be aware of what you should be looking for in a property. You should keep a few things in mind when viewing properties: –
- Check for age
- Check for zoning
- Be wary of anything that could support future expansion
- Check for soundness of structure (i.e., structural integrity).
If you follow these tips, you will not have to worry about any hidden issues later. You will know what to look for so that your investment goes smoothly.
Check for Lease Terms and Rent Increase Clause
One of the first things you should look for when looking for a commercial property is a lease term, typically three years. This ensures that you have sufficient time to determine if your business will be successful in the location and whether or not it will stay there. You should also look for a rent increase clause in case you need to adjust the rent to keep up with rising costs.
Understand the different types of Commercial Real Estate
The number of commercial properties available in the market changes depending on the property type. There are five types of commercial real estate, and they are as follows:
- multifamily, and
You will want to know all about each type of commercial property and what it offers for your business so that you can have a better understanding before you begin your search for potential deals.
Conduct market research before you invest in rental property
Before you invest in rental property, it’s important to conduct thorough market research. Many factors play into whether or not a property is worth investing in, such as the property’s location and size; before you decide to invest, research and find out what is going on in the market. One market research method is looking at commercial real estate listings.
Commercial real estate listings usually have detailed information about properties, including their square footage and the number of rooms. It’s also helpful to see what the current sale price for the property is so that you know what other investors are willing to pay for it.
Invest in a property with all the right features
When searching for commercial property to rent, you have to consider the features necessary for your business. You need to know what type of space will suit your business and what kind of lease terms will leave you with the most profit.
You need to learn how much it will cost to maintain the property and ensure it has all the amenities that suit your needs. Once you know these things, you can find a property that perfectly suits your needs. The major factors determining whether a commercial property is worth investing in are location, lease terms, and amenities.
The key is finding a property that meets all three of these requirements. When you do this, you’ll be able to find a perfect fit for your business and save money on maintenance and lease costs.
Stay informed about the local rental market to find good deals.
Before looking for a potential company or office space, stay informed about the local commercial real estate market. You can do this by reading local business newspapers, joining commercial-specific social media groups, and talking to other investors in your area.
This will help you get an idea of what types of properties are available, how expensive they are, and how much turnover there has been lately. If you choose the right property and negotiate a good deal with the owner, you’ll be able to rent it out at a fair price for your business.
Inspect the Premises for Durability and Readiness
When you are looking for a commercial property, the first thing to do is inspect the premises. Make sure it has all the necessary features and equipment to operate your business.
It’s important to find a property that will be in good condition for many years. You also need to ensure that you have enough parking space and nearby access to utilities. Next, consider what your company needs from the property. Do you require office space, or do you need warehouse space?
Countless factors determine what type of commercial property is right for your company. Once you’ve found a commercial property with all the necessary features and requirements, make sure it is ready for your business by inspecting and asking potential sellers questions about their experience renting out the property before listing it on their site.
Finding a trustworthy tenant
A suitable and trustworthy tenant is the most critical step in renting a commercial property. For this purpose, you can hire an agent who is a good option if not finding the right tenant can be extremely time-consuming and expensive. For this purpose, coordinating with a professional agent saves you from lots of hurdles and saves them time and money. It also reduces the burden of dealing with multiple tenants simultaneously.
Negotiating a fair deal
To build a better relationship with your tenant, pre-decide on specific terms and conditions. For example, if you don’t want a pet on your property, you must tell the tenant before the deal and mention it as a key term in your tenancy agreement.
You can also restrict the tenant from making any change in the structure of your commercial property, or you can allow construction in only particular parts.
Carrying out legal procedures
- Your deal should be according to the laws to prevent misuse and exploitation.
- Avoid being a Nosy property holder:
- Successful property holder-tenant relationships are usually built upon trust and considering the tenant’s privacy.
Things to Consider For Commercial Property Renting
Hands-down, renting a property to generate recurring income is one of the safest investment options. While the 2019 coronavirus disease (COVID 19) pandemic impacts the US real estate market generally, while the development and increasing availability of COVID-19 vaccines, many US states completed re-opening of their economies, ending stay-at-homes and lockdown orders.
These measures pent-up consumer demand for goods and services throughout the lockdown, which results in an increase in performance after depressed markets.
Commercial and residential real estate comprises two categories of real estate property. Residential properties include residents for human habitation, not commercial and industrial use. Commercial real estate is primarily used in commerce and multi-unit rental properties for tenants, classified as a commercial activity for the landlord.
It is possible to acquire US commercial real estate in an individual capacity. The following factors should be considered when choosing the type of entity
- Tax concerns
- Personal liability of investors
- Management concerns
- Transferable ownership interests
Commercial Real Estate Sale Contracts
- A legal description of real property.
- The purchase price and contract deposit.
- A description of any enclosed fixtures, personal property, leases, employee obligations, and other material items.
- Warranties and provision.
There are several predicted trends for 2022 depending on the type of commercial real estate investment:
As more and more consumers shop online, the experts predict up to 25% fewer retail stores by 2025. New York and San Francisco retail stores are expected to replace healthcare, grocery, and other alternative stores.
Apartments were expected to struggle during a pandemic, but the demand for housing has not decreased. The apartments with more reasonable prices and low-interest rates are expected to remain stable in the following years.
Rental property upgrades:
Multifamily property owners notice an arrival in applications for larger units because renters usually work from home. Upgraded units become more interested in competitive markets; renters want to improve their living styles and arrangements.
New development projects are expected for housing markets to meet growing demands for housing.
- Hedge against the stock market.
- High-yielding source of income.
- Stable cash flows from long-term tenants.
- Capital appreciation potential
- More capital is required to invest directly
- Greater regulation
- Higher renovation costs
- Illiquid asset
Frequently Asked Questions
What is the difference between residential property and commercial property?
In residential property, the property holder plays a significant role in their personal lives. Commercial property is not primarily used as a residence: office spaces, hotels, and warehouses.
What is a lease?
A lease is a legal document with all the terms and conditions written on it, and both parties agree to rent the property.
What is a tenant?
A tenant is a person who gets the land or property rented from a property holder and a person who uses the property for any commercial use.
How to find tenants for your commercial property?
There are many ways you can find a tenant for your commercial property:
- Find a commercial real estate broker or agent who is experienced in the market
- Online advertisement is hands down one of the best ways these days
- Spread the word and do complete research
Commercial real estate property dealing is one of the most common and valuable, but you should understand that the core skills required are the same as residential property investment. Any type of investing associate with a particular risk; it’s up to you to find ways to relieve that risk.
Sheena Whitlock, a property expert, and blogger with over 15 years of experience in the field. The knowledge and skills Sheena has acquired during her career have given her invaluable insight into the property management business.
She has done her Property Development BSc (Hons) from the University of Portsmouth and completed her Master’s Degrees in Property Management from the University of Chicago.
As a professional, she has spent time working for various companies as a property management officer and currently works at Asset Info Hub where she shares her knowledge and experience on various property matters with people around the world, questioning their queries via blogging and virtual consulting services.