Business Rental Properties
1. You Need Start-Up Capital
Even though you might be renting property to a business instead of a family, you're still going to become a landlord. You'll need capital to invest into a building that is zoned for commercial purposes and then you'll need to make sure that property is up to current codes.
2. Most Business Rental Properties Need To Be Built Out
In order for a business to function, there are certain requirements that will need to be met. A retail establishment may need a built-in register desk. A restaurant would need kitchen equipment, venting, and fire suppression equipment included with the building. You may need to front a portion of this build out cost to attract a renter.
3. You Need To Be Proactive About Collecting Rent
A majority of business tenants are very good about paying their rent on time. When a business isn't going well, however, it is easy to see how a renter might try to get out of paying the rent on time. You can always pursue a business owner through the legal system for your contracted income, but that means notices, collection activities, and the ability to confront a delinquent renter.
4. There Are Always Going To Be Certain Problem Tenants
Most business owners want to stay on the good side of their landlord because they're trying to create a win/win situation. Some tenants, however, can only be classified as problem tenants. Some stop paying the rent. Others add upgrades to the property that weren't agreed upon. There will be some that cause damage to the property. Being able to handle those issues and remove a business when necessary must become part of what you're comfortable doing.
5. Evictions Are Never An Easy Thing
When a business owner fails to meet their payment deadline, you want to give them every chance to succeed. You might even need to improve your building because it is getting run down. The problem is that any eviction is going to cost you money. It's never an easy thing to keep paying out into an asset without income, but sometimes that's life with a business rental property.
6. Keep Up With Your Taxes
The taxation on your income can get to be very complicated when you've got a business rental. There are certain costs that depreciate and then there are certain costs that are write-offs on the first year. Not only do you have your income taxes, but your property is being taxed as well and commercially zoned properties tend to have higher rates than residential properties.
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