Leasing out your commercial property investments is one way to garner great returns and a steady income stream but it’s not one without its drawbacks and challenges. Like everything else, landlords and owners can find themselves swamped with a dilemma or two. If you’re not careful enough, you might just find yourself in the same boat.
So what are the pitfalls to leasing out your commercial property investments? Check these out.
Pitfall #1 – Rental Vacancy
It would be awesome if each and every rental unit is filled throughout the calendar year but what if they’re not? Long rental vacancies can signal not only a cash flow issue but also a depreciating asset that does not generate income.
It takes a well-situated, adequately maintained and effectively advertised asset to drive enough demand to fill the commercial properties with lessees.
Pitfall #2 – Bad Tenants
But not every potential tenant means income. Some of them present quite a burden. Let’s not even begin to talk about the losses. That’ll take up an entire day to finish. Bad tenants do more than just hand out delayed payments or no payments at all. They too present other issues such as a poorly maintained asset that’s been damaged beyond repair.
The fix? Make sure to screen tenants too. If you don’t, you’ll get yourself a headache. Filling up your investments with tenants may be a priority but make sure that they are good ones.
Pitfall #3 – Dilapidations
Dilapidation refers to an asset falling into a state of disrepair as by misuse or neglect by the party responsible for its upkeep and care. Part of leasing out commercial spaces includes repair and maintenance responsibilities. These tasks can be divided or assigned either or both to the tenants and the landlord. These must be carefully laid out and discussed ahead of time and put to paper by means of a contract.
An asset that has fallen into a state of disrepair is a huge loss so be sure that you make the responsibilities of all parties clear ahead of time. Do your part and let them do theirs.
Pitfall #4 – Soaring Ongoing Costs
Repair and maintenance requirements come with costs to investors. This is why it is important to opt for commercial property investments that don’t require too much or too high of a cost in such matter. After all, they’re regular expenditures that will be spent for the entire duration of the asset’s useful life.