Renting out properties to commercial tenants can be a far better option than renting out residential properties. One thing that you might like about renting out commercial properties is that you might feel more certain that commercial tenants will pay. Unfortunately, this is not always the case. You will still need to take certain precautions to help protect yourself and ensure that you will get paid on time, so try these three tips.
1. Do Your Research About the Business
First of all, you should do as much research as you can about the business that will be moving into your rental. Getting online and conducting a search about the business can help. Basically, you'll want to look for red flags that the company might be in trouble, such as multiple different addresses in a short period of time or a lot of really bad online reviews.
2. Check Out the Company's Financials
You wouldn't want to let a residential tenant move into your rental home without asking to see proof of income, so you shouldn't do so for a commercial tenant, either. Ask to see the company's recent tax returns or bank records. This can clue you in to how much money is coming in and out of the business and can give you a better idea of whether or not the business can actually afford to pay the rent each month.
3. Ask for a Personal Backing
For a larger business, you may not have a need to ask for a personal backing. For smaller, less-established businesses, however, you may want to ask the owner to provide his or her social security number and personal income information. By having a personal backing on the lease, you will be able to hold the owner responsible if he or she does not pay. This can provide extra protections for you, because if the business goes bankrupt and doesn't pay you, you might not have much recourse otherwise. If you do choose to do this, you should talk to a lawyer to ensure that the lease is written up properly, since laws do vary from state to state.
Investing in a commercial property and renting it out to a commercial tenant can be a smart move. However, you still have to protect yourself. To ensure that you choose a tenant that will pay the rent, consider taking these three steps when choosing a tenant.
Contact a business like Realty Executives to learn more.