Investing in commercial property can be a great way to secure your financial future. Whether you work towards investing in one property or many, purchasing commercial property as part of your investment plan is a great long term strategy to help increase your portfolio and financial worth.
Creating an investment strategy starts with one investment at a time. When you start small you get the chance to learn the best way to manage your assets and build from this stable base. When you have one or a small number of commercial properties you may choose to manage these yourself to help save yourself cash in real estate management fees. So, what do you need to know to be a landlord for your own property? Here are some tips below.
Learn the Law
Make sure that you understand the law for both landlords and tenants and their rights. Learn the ins and outs of what the law will provide you and the support it may provide your tenant. Make sure you spend time understanding what you responsibilities are as the owner and landlord of the property. Check out the relevant consumer affairs websites for your state. VCAT also provides a helpful service for dispute resolution between yourself and a tenant. Hopefully you never need to go down this path but understanding what you can do to protect yourself and your asset is valuable.
Customise the lease
Each property will require a different lease, which may differ again for each tenant, i.e. the length of the lease, the outgoings, the make good clause, etc. When it comes to commercial property leases, this can take some time to settle and agree on. Be patient with the process as commercial leases tend to last for several years compared to the 6 to 12 months for a residential lease; meaning you have a longer guaranteed return on your investment if done correctly up front.
Inspect the property regularly
Doing regular property inspections shows your tenant you care about the property, that it’s in a high functioning order and that you are on hand to maintain the property should something go wrong. Plus, inspecting your property gives you a chance to fix minor repairs with the property before they become big costly issues later on.
Be in it for the long haul
Property investing is not a get rich quick opportunity. You will need to be patient with all your property investments, especially commercial property investments. Some commercial properties may take longer to lease out so you may have to manage a property with long stretches of time untenanted. This means that you need to factor that into your budget, however the payoff is that most commercial leases outlast residential leases by 4 times.
Choose tenants with a great reputation
References are key. Finding a great tenant isn’t as hard as it sounds. When seeking a tenant it’s best you do these three things: credit checks, gather references and interview potential tenants. Of course there are times when things still don’t work out but without a crystal ball no one can predict the future. These three things will help to ensure your tenant can afford your property, have a good business reputation and that you can build a relationship with them as landlord and tenant.
Here are some tips to becoming a fabulous landlord
Communicate & build a relationship
Make sure you spend time with your tenant. We don’t suggest you become their best mate but as you learn to build a relationship you may learn about their business, their drivers and their future direction. This may help give you confidence in your choice of tenant, and your tenant confidence in you as a landlord.
Listen & respond
Business owners are busy, so if they do reach out to you with questions or reports on repairs required, listen to what they have to say and respond in a timely fashion. Buildings will always require repairs, they are prone to wear and tear so repairs are a part of every landlord’s job description. Businesses owners need to function as smoothly as possible and building maintenance and repairs are often the last thing on their mind, until something goes really wrong. If a door handle is wobbly, spend time sending out a locksmith to fix it up, instead of waiting for the call that the Handle has fallen off and the tenant can no longer access their building.
When working with tradesmen, suppliers and tenants try to be specific about your expectations on timelines and budgets. Communicate clearly with all parties involved to avoid confusion and delays on any repairs or work needed for your commercial investment property.
Be proud of your investment
Ensure that if there are repairs due on a property they are completed to a high standard. As they say, if you don’t buy nice, you buy twice. Use qualified and trustworthy professionals to carry out all works, otherwise you will be paying twice for the same service.
Be accessible & available
With all the ways we can communicate, it makes sense to not limit your communication with your tenant. Send letters for official notifications and leases, call for approval or updates on works, SMS when tradesmen will be attending. Pop through an email ahead of time for routine inspections. This will help build rapport with your tenant and provide clear expectations for the duration of their lease.
Hopefully, with these skills under your belt, you're on the way to being a successful landlord, with happy tenants and solid investments.