An Owner's Guide to Commercial Lease Analysis in Texas

An Owner's Guide to Commercial Lease Analysis in Texas

Commercial property values are skyrocketing in El Paso. As a real estate investor, a rise of 25% in value represents a potential for profitable long-term investment. To make the most of your real estate investment, you need to place commercial tenants who will pay monthly rent.

You need to perform a commercial lease analysis before committing yourself to a tenant agreement.

Decide on Type

There are three types of commercial leases that you can have: gross, percentage, and net. A gross lease will have a flat fee structure. This amount includes the rent and operating expenses.

A percentage lease includes an additional payment of a percentage of the tenant's gross sales. This type of lease is common for retail commercial property tenants.

A net lease can be one of three types of subcategories: single, double, and triple net lease. Under these leases, the tenant pays a base rent plus a portion of the building's operating expenses and property maintenance. How much of the operating expenses will depend on the type of net lease.

Look at the Numbers

Once you understand what type of lease you have, you can focus on the numbers. Confirm the numbers listed in the lease to verify accuracy. This would include the rental amount, lease term, and any additional financial responsibilities.

Use Terms

You should confirm that the terms comply with commercial property laws in Texas. This will set you up for long-term success by having an agreement that is legally enforceable.

As the property owner, you will have to balance your interests with the tenant's. As the landlord, you will want to protect your property by defining how the tenant can use the property.

The tenant will want protection for their business. They will ask that you limit other tenants by not allowing them to perform a similar use or business as the tenant. While you want to make your tenant happy, you also don't want to limit your property's profitability.

In addition, define what the tenant can or cannot do to change or improve the property. If you allow the tenant to make changes, you will want to also include a term that requires to return the property to its original state.

Renewals and Conflict Resolution

People tend to forget about what happens at the end of the lease. Look ahead by including lease renewal and conflict resolution terms. This streamlines these processes for a better tenant relationship and smoother property management.

Get a Second Opinion

If you do not have experience reviewing commercial leases, it's wise to get a second opinion. A commercial property management company can review your commercial lease for you. They can provide insight into market trends and what your lease means for the long-term management of your property.

Perform a Commercial Lease Analysis

Selecting the right type of commercial lease and thoroughly examining the lease terms are crucial steps in successful commercial property management. Perform a commercial lease analysis to confirm legal compliance, verify the terms, and ensure the lease protects you and your tenant's interests.

Let the experts at PMI El Paso analyze your commercial lease and get guidance from the experts.