Have you ever wondered why, so often, we see so many empty storefronts, immediately next to fully occupied buildings? Why do some landlords have so much more tenant turnover and vacant apartments than others? For the sake of this article, we will assume that all other things / features are similar / the same etc, so we could fully examine, 4 basic considerations, the rental philosophies of a particular landlord, often impact. Owning an investment property can be financially smart and valuable, or a potentially risky proposition. This article will briefly attempt to consider, examine, review, and discuss a few things to consider and evaluate.
1. Prices: Some landlords decide that their best strategy is to price their rents as high as possible, while others prioritize the quality of the tenants, etc., and might price somewhat lower. I have witnessed, stores, in large locations, remain empty, for long periods, because, of the rents, while others, they are rarely empty! Proponents of the first philosophy generally claim that they do so because they believe that, in the longer term, future rents will continue to be higher doing so. However, for example, if a store, which charges $ 3,000 per month, remains empty for a year, how long and how much more must be charged to recover that $ 36,000 per year? Residential owners also have the option of setting prices, at the higher end, in the middle of the market, or towards the lower end. If one’s goal is to abuse tenants, they need to understand that it typically leads to more turnover and an eventual loss of rents / increased vacancies. One reality is that every time an apartment flips over (one tenant leaves and another begins the lease), it becomes a major expense for the landlord!
2. Tenant quality: What is the value of the quality of a tenant? Wouldn’t you prefer quality tenants, who pay their rents on time, are reasonable, have good quality character, and take care of their property? As the owner of several rental units, I have found that my property is much less stressful than those who only focus on obtaining the highest rents.
3. Occupation: When turnover is low and you maintain a near full occupancy, you will generally have less stress from owning.
Four. Cash Flow: Calculate your rents, based on a combination of your fixed / known costs / expenses, plus reserves for vacant apartments, repairs, renovations, appliance replacements, etc. When done right from the start, you will protect yourself by having a positive and comfortable cash flow!
If you want to own a commercial property, proceed carefully, wisely and in a prepared manner. Consider your options, don’t be greedy and proceed accordingly!