With India on a path of growth and development, the number of investors looking to investing in commercial properties has increased manifold. The challenge lies after purchasing the commercial property, which is leasing out or renting out the property. Before treading on this path, it is imperative to be a little cautious and consult an expert who can take you through the ins and outs of this decision. They can also guide investors in renting out commercial property. There are certain aspects of the decision that needs to be looked into in a lot of detail. Hence, Wave City Center brings you the four points guide to renting out commercial property.
Step 1: Searching for a suitable tenant
One of the major steps that need to be taken to make the whole investment idea financially viable is looking for the right tenant. It is good if a person is already in touch with some reliable prospective tenant. But, if you don’t know anyone who would like to occupy your property, it is wise to seek the help of a real estate agent. Finding a tenant on your own is cumbersome, professional consultants can assist you with this task.
Step 2: Understand Terms and Conditions, negotiations carefully
Before signing on the dotted line, it is imperative to go through the terms and conditions of the contract carefully. Many factors need to be considered. Some of the major factors are exit/termination clause; lock in period, escalation, rent clause, assignment or sublet rights, scalability and more. There may be certain periodical outgoings relevant to commercial properties like maintenance charges, property taxes, TDS or tax deducted at source. It is important to find out more and ascertain the responsibility of paying taxes. As per the prevalent market practice, existing as well as future taxes being paid to the government is the responsibility of the developer/ landlord while the tenant pays the current and future escalations related to maintenance costs.
Step 3: Agreement Signing
Once a tenant has been finalized and terms and conditions are decided, the lease needs to be signed. The lease term may vary from state to state, but the general lease term is three years each for three consecutive times with options of renewing after the initial term. It is important to understand this clause before signing the lease agreement to ensure transparency in the contract.
Step 4: Lease Registration
Once both the parties have signed the lease agreement, it gets registered with the relevant authority by paying registration and stamp duty cost. Typically, registration costs are borne by the tenants. These expenses are defined in advance and are governed by the local sub-registrars.
Once the task mentioned above is over, the owner of the property has another task in his hands, that is, regular inspection of the property and once in a while maintenance work.
When you get good tenants, you manage the tenancy in an effective and efficient manner by following above four points about renting out the commercial property.
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