Tips For How to Negotiate a Commericial Property Lease

Starting a new business can be overwhelming and challenging, and one of the most difficult parts can be finding an affordable office space. If this is your first business the process of finding a lease that works for you and your business can seem daunting, but there are a few questions and things to consider before jumping into a lease.

Setting the Term of your Lease

The term and rent of your location is the first point that needs to be negotiated. The trick to this is to not over commit if you are a small business. It's recommended that small businesses negotiate one to two year leases with the option to renew. You will also want to discuss and negotiate rent increases over the term so you are not unexpectedly hit with a rent increase with no warning from your landlord.

Be prepared for your landlord to push back, they may try to lock you into a longer agreement by offering deal sweeteners. It is helpful to bring a broker to negotiations, as they know about the local market and what sweeteners to look out for.

Expenses

Like residential leases, landlords often tack on extra expenses like maintenance fees, upkeep fees and so on. Make a point to ask the necessary questions during negotiation: what about utilities? how are these extra charges measured? Also look into the "hidden fees" and policies and inquire about the average costs of previous tenants.

Maintenance and Repair

Unlike residential leases where the brunt of the maintenance and repair responsibilities fall on the landlord, commercial leases are different. Commercial leases vary in their approach to this, some stipulate that it is the tenant that is responsible for all the property upkeep while other specify that the tenant is only responsible for certain repairs etc.

Defaulting

Often businesses get closed down due to defaulting their lease. In order to protect your interests and your customers, it is important to know exactly what defaulting terms you are agreeing upon upfront. Talk with your landlord and decide if you will be locked out immediately or if you will be granted a grace period. Will you be able to negotiate for more time for yourself if you default? All of this information is important as it can save you  and your business money.

Read Your Lease

It goes without saying that you should always read and reread your lease carefully and completely to make sure you fully agree with and understand all of the terms and clauses.

About the author: Mary is a guest contributor from The Lansing Economic Area Partnership or LEAP, a coalition of area leaders committed to initiating Lansing, Michigan economic development.

Real Estate Investment Time Again?

In my opinion, there is no quicker, easier or safer way to build wealth than through real estate. In fact, the laws of this land are written heavily in your favor to purchase real estate, user real estate to lower your income taxes, and to keep most or all your investment gains. The same can’t be said of any other investment vehicle.

Buying Property
Boy, is it easy to qualify for a home loan. Would you loan a stranger $250K? Banks do it all the time. The hardest part of getting a conventional loan is the down payment, but banks will even loan you the down payment! There are many programs out there in our local Syracuse area geared towards first time homeowners that can get you into a property. They can’t wait to hand over their money. So take it.

Owning Property
Homeowners can deduct interest on mortgages and property taxes on their primary residences. On investment properties, government forces owners to depreciate residential property over 27.5 years, even though in reality the property is appreciating. So that means if the rent minus all expenses puts real money into your pocket year after year, your taxes can legally show a loss. For example, a condo which cost $275K is depreciated at $10K per year. Let’s say that every month, the positive cash flow from that property is $500, or $6K income for the year. But because the property “depreciated” $10K, my loss on the books is $4K, and consequently, my taxable income is reduced by $4K.

Selling Property
Homeowners can keep capital gains tax-free (up to $500,000 for married couples filing jointly or $250,000 for singles), provided that the home was the primary residence of record for at least two of the prior five years. The exclusion can be taken every two years. On investment properties, Section 1031 of the Internal Revenue Code allows owners to roll the gain from the sale of the old property to a new property without paying tax, provided that the new property is equal or greater in value to the old property and all of the proceeds from the sale of the old property are invested into the new property. We're seeing this happen all the time out here in New York.

So with all these benefits, if you aren’t into real estate, you should ask yourself why.

This post was contributed by William Cross Reality, providing Syracuse real estate.

Real Estate Market

Real Estate (Photo credit: allan.hane)It's hard to believe that anyone would have anything good to say about the United States real estate market, but that's exactly what's covering the news. Newspapers and media outlets from CNN and the New York times to the Unionville Times are projecting positive growth in home sales and home prices. Those are two numbers that any economist would see as negativity correlated. Why the sudden boom? Well there are many reasons, but here are some of the biggest:
The number of foreclosures is finally on the decline, a hangover that is starting to go away since 2008. That means that there are fewer homes on the market, meaning prices will be increased and more home owners will be more willing to sell their homes for agreeable prices. This is mostly good news all around as home sellers and real estate agents get the prices they want, and there are enough houses on the market as it is, so home buyers don't see much of any loss.
One hot real estate market at the moment would be the Albany Oregon real estate market. Located out in central Oregon, this once sleepy town is now the center of new businesses and industries. Located nearby is Corvallis, which has some great homes for sale in Corvallis Oregon. Don't miss out on some of these niche markets if you're an investor!