If you have been looking at real estate options to invest in, then apartment buildings and houses may be at the top of your list. However, a retail space may just be your best choice if you want to see a positive return on your investment. Leasing the space is a wise choice, so keep reading to learn about some leasing tips that will help you to come out ahead financially.
Consider Leasing to a Franchise
Some real-estate investors will shy away from leases that involve franchises. Franchise owners will take a long time to choose a location, and a site review will need to be completed. Site reviews can be stressful because they involve a full inspection of your business and the surrounding area. Traffic patterns may even need to be assessed nearby, and the franchisor will need to visit the location before giving the go-ahead on the lease. The entire process can take months.
While you may lose out on tenant income for several months, a typical lease will involve the basic rent for the space as well as a percentage of profits made by the franchise. Franchises are less risky, more successful, and more profitable than independent businesses. This means more money in your pocket if you lease to a franchise owner.
Be Flexible with the Lease
A lease often requires the drafting of a fairly stringent piece of legal paperwork that will protect you and the business owner. While adding stipulations to the paperwork may seem like a great idea for reducing your risks, you may end up stifling the profits of the business occupant instead. This can lead to a reduction in sales and a folding business. If you want to reduce this concern, then you will need to allow for some business flexibility.
When you work with a business occupant and a lawyer to draft a lease, there are certain stipulations you should add to the lease. Allowing for business and partner transfers are a good idea, because they allow the business to change hands seamlessly without violating the lease agreement.
Also, make sure that the use clause in the lease agreement is broad. The use clause dictates exactly how the space will be used. However, if the clause is too specific, then a business may not be able to expand. For example, if the clause indicates that the occupant can use the site only as a daycare, then this may stop the business from expanding to offer after-school programs for older children.
The best use clause will be one that allows for reasonable expansion, so make sure to work with either a real-estate or legal professional to get the wording of the clause right on the lease agreement.