I was reading some commercial articles, as I always do to keep up to date with the industry and I came across an article which gave me food for thought.
Actually the article was written for prospective tenants. It was showing them what they should look out for when signing a new lease.
Now I know some people are sharks. I’m not one of them.
I’m astute; don’t get me wrong, but I prefer to have a situation where it’s a win/win for both parties.
Actually it was an eye opener as to what some landlords will try to slip under the radar…
The make good clause, which generally requires tenants to bring the property back to where it was when they took it over, taken to the extreme: Requiring the need to paint and recarpet before they move out.
I’m sure in a busy office space the carpet could get quite worn, but for my properties it seemed a little harsh.
More to the point tenants who are serious about their business, especially when you have a client facing business like a cafe, can often spend a lot of money on your property. I’m left wondering why you would want them to pull all of that out if they decided to close.
I’ve said it before and I’ll reinforce this again now: the more your client is invested in your property the longer the tenancy is likely to continue.
Think about this: if their livelihood is tied to their location. If they serve a local customer base and rely on that customer base in the same way as the customers rely on them, then they are going to never want to move from your location.
How often would you go to the same supermarket if the location of that supermarket changed all the time?
Imagine you had a supermarket on a bus, and all you could do was to go to where the bus was parked last… not knowing whether or not it was still going to be there.
How often would you go before you just gave up and opted for the one you knew was going to be there?
Stability is a critical element of the success of most businesses and that’s a need you can take to the bank.
You may notice that different commercial investors have different styles of property that they like. This is not to say that one type is better than another. It all comes down to knowing how to make it work.
But for me personally, I love retail. I love cafes. They work for me and I know how to work them.
The other thing that really struck me in this article is for tenants to know the zoning.
I have heard of tenants signing a lease and start up a business only to hear from the council 6 months in that the zoning does not allow for the kind of business they are operating.
That’s a disaster.
Yes I know I’m the landlord and it’s not my business, but like I said: Win/Win. it’s never good to see a good tenant go, especially for a stupid mistake like that.
It’s worth mentioning because I always suggest that you due property due diligence before you buy a property. Common sense really.
In the process of doing that research you absolutely want to make sure you check the zoning in case there are some interesting upsides that you could engage to increase equity down the track.
But while you are doing that take a moment to consider what kinds of businesses can be run from that property. It may not suit everyone.
Not all tenants are going to be savvy. Not all of them are going to fully check things out. For that reason I believe that it’s well worth making sure that they are aware of zoning limitations and other such encumbrances and hindrances.
It could possibly save them a huge nightmare and make sure you get a tenant that is going to be happy to stay longterm.
In the long run, for the sake of your business and the stability of your income it’s way better to do a little work for your prospective tenants, add leases that allow them to run their business and potentially improve the value of your property and help them out with the right information.
If they know what they are getting into with no unexamined fine print then you’re more likely to have a solid tenant that will want to stay on for years.