From long lease terms to tax benefits, there are several financial benefits to becoming a commercial landlord. To get this steady income, however, you'll need to understand business lease terms comprehensively.
Here, we're going to discuss commercial real estate terms including:
- The types of commercial leases
- Negotiation tips
- How to draft a legally-binding lease
Read on for a run-down of commercial lease agreements in Layton, Utah.
Gross Leases
A gross lease, also called a "full-service lease," covers all expenses for operating the rented property. The landlord pays them but uses the tenant's rent to offset operational costs. Some of these expenses include:
- Utilities
- Maintenance fees
- Property taxes
Tenants like these commercial real estate agreements because rent is fixed. They don't need to worry about paying several bills.
Even if utility usage is higher one month than others, they still pay the same amount. This makes budgeting easy. Your property may be more competitive.
Net Leases
Net leases have significantly lower rent than gross leases would. This makes your property appealing because you can market it as having lower-than-average rent. However, the tenant also needs to pay the additional expenses that a gross lease would cover out of their own pocket.
There are four net lease types:
- Single net leases, where the tenants pay a set rent + a portion of property taxes
- Double net leases, where the tenant pays for those things + a portion of the property insurance
- Triple net leases that encompass property taxes, property insurance, and common area utilities
- Absolute triple net leases where the tenant takes on all costs within the building
Single net leases and double net leases tend to be most competitive.
Modified Gross Leases
Modified gross leases are a cross between normal gross leases and net leases. These commercial lease agreements tend to be the best option for both landlords and tenants.
The modified gross lease agreement checklist includes:
- A base rent
- Pre-negotiated terms for utility/tax/maintenance fees
- What portion of operating expenses each party pays
Lease Negotiation Strategies
Negotiating a lease requires landlords to enlist commercial property managers in Layton, Utah. These experts will:
- Research Layton market conditions
- Determine average rental rates for similar properties
- Talk with potential tenants about lease term length and renewal options
- Set rent escalation clauses over the lease's duration
- Remain flexible when talking to quality tenants
- Talk with commercial real estate attorneys when necessary
You'll get the best tenants and top-notch lease terms for a high passive income.
Drafting Commercial Lease Agreements
Property managers can also draft business lease terms in a legally binding way. They'll:
- Include all clauses and contingencies
- Use technology to structure the lease for readability
- Comply with local zoning laws and regulations
- Review the document for errors and typos
- Hold onto the agreement in a safe digital dashboard
Manage Commercial Real Estate With Experts
Now that you have a comprehensive lease agreement checklist, it's time to begin managing commercial real estate the right way. PMI Home Team is excited to help you negotiate and draft leases for quality commercial tenants.
We're committed to helping you make the highest passive income from commercial lease agreements, so get a free rental analysis to learn how much your property is worth.
