As property owners, we all want to get the highest rent possible. But it's important to remember that the tenant you choose can greatly impact your property's overall success. So, it's not just about the money
– it's about finding a reliable tenant compatible with your property. But how do we confidently select the perfect tenants?
Join us as we explore nine ways to choose the right tenant for your commercial property. From setting clear qualifications and ensuring business compatibility to trusting our instincts and protecting our information, we'll provide valuable tips and insights to help you make the best decision for your commercial property.
1) Tenant Pre-screen:
As a landlord, tenant pre-screening is essential to the rental process. Not only does it help narrow down your pool of prospects to the top contenders, but it also allows you to attract high-quality tenants who are the perfect match for your property.
So, where do you start? The first step is to include your pre-screening conditions in your rental listing. This serves as an introduction to potential tenants, so outline the cost of the screening process and any necessary background checks. This sets clear expectations from the start and helps everyone stay on track. Plus, it ensures that you only attract tenants willing to put in the effort to secure their spot on your property. It's a win-win situation!
Be bold and ask tough questions as you navigate the tenant screening process. It may seem intimidating initially, but finding the perfect tenant is worth it. Some key questions to consider include: who will be occupying the space and who will be responsible for the lease? What does the tenant's business do, and who are their target customers? These questions can give you an idea of the tenant's business practices and how they'll fit within the local market and your tenancy mix.
2) Find the Right Fit
It's important to consider the intended use of the space by prospective tenants. After all, you want to ensure their use complements the property and existing tenancy mix.
For example, suppose you have a mixed-use property with retail space on the ground floor and offices above; leasing the bottom floor to a business with loud activities, like a Fitness World or Champions Kickboxing, would create unnecessary complications with the office tenants above. On the other hand, a tenant with many employees who commute is not the best fit if you own an office building with limited parking.
Choosing the right fit can prevent significant disruptions and create a positive environment for your overall tenancy mix. That's why gathering as much information as possible about a prospective tenant's operation is essential. Ask about their parking needs, hours of operation, number of on-site employees, and other relevant details. The more you know upfront, the more likely your new tenant will be a positive addition to your property.
3) Finding a Value-Adding Tenant
Looking for alternative ways to boost demand for your commercial building and increase your rental income is important. One option to consider is leasing to experiential tenants.
Experiential uses involve creating a personalized, interactive experience, such as immersive realities and workshops. By leasing to experiential tenants, you can create a more engaging experience for your customers, which can drive demand for your building. This can lead to higher occupancy rates and the ability to charge higher rent.
What kind of experiential tenants might be a good fit for your building? These tenants offer a unique and engaging experience that can attract customers and drive demand for your property. Some Vancouver examples include Denim brand Duer in Gastown, i-Exit Escape Room, or Present Art Studio in Vancouver.
If you're interested in leasing to experiential tenants, consider the specific needs of these types of businesses. For example, they may require more space for interactive exhibits or have different operating hours than traditional retail or office tenants.
4) Verify the Business and Income
It's crucial to verify the business and income of potential tenants before leasing out your commercial property. Not only does this ensure that you'll have reliable tenants, but it also gives you valuable insights into their operations and potential fit within the local market.
Vancouver is home to diverse industries and businesses, so it's important to ensure your tenants are a good fit for the local scene. To verify their business and income, start by asking for some basic documents such as bank references, personal and corporate financial statements, and a business plan.
The paperwork required for tenant screening can sometimes seem overwhelming, especially when dealing with different types of businesses. But don't let it stress you out! Remember, having all of these documents in order can help ensure the success of your commercial property.
For example, a corporate entity might need to provide you with a certificate of incorporation, director names, and more. On the other hand, a limited liability company might have to give you the names of their current members and managers, articles of organization, and a certificate of filing. It might seem like a lot to keep track of, but it's all worth it when you have a reliable tenant for your property.
5) Credit Check
It's important to establish creditworthiness when pre-screening potential tenants. After all, you want to ensure they'll pay their rent on time and uphold their lease obligations. So what goes into determining creditworthiness?
There are a few key factors to consider. This might include their financial records, rental history, payment track record, industry assessment, and attitude. It's also a good idea to get a solid picture of their financial standing by reviewing their income statement, balance sheet, and income tax returns.
It's worth taking the time to review a prospective tenant's creditworthiness thoroughly. Be bold, ask tough questions, and dig deep to get a complete picture of their financial situation. By doing so, you can help ensure the success of your commercial property and minimize risks. By establishing creditworthiness during the tenant pre-screening process, you can help ensure the success of your commercial property.
6) Background Check
Curious about what kind of information you can uncover during a tenant background check? The answer is a lot! Depending on the scope of the investigation, you might discover all sorts of interesting details like address verification, bankruptcies, criminal convictions, credit history, and more. And don't worry, we're not here to judge - we want to help you make informed decisions about who you lease your commercial property to.
When checking criminal records, it's important to find a reliable company to do the digging. It's more challenging than it sounds! Just include the necessary consent in your pre-screening process, so your potential tenants are in the loop and can give their approval when needed.
So go ahead and dive into those background checks - you never know what you might uncover! Just make sure to keep your tenants in the loop.
7) History and Reference Checks:
If a tenant is moving their business from another location, you'll naturally want to know how they've handled renting in the past. So what kind of questions should you ask?
Start with the basics - things like the property's address that they previously leased, the length of tenancy, and the monthly rental amount. You should also find out their reason for leaving, whether they consistently paid their rent on time and if they took good care of the property.
Just remember to be respectful and keep the conversation light. And don't be afraid to get a little nosy - it's all about finding the perfect tenant for your property! After all, you want to understand their rental history without scaring them off.
8) Know the Needs of the Tenant
As part of the tenant pre-screening process, you will need to understand your potential tenants' needs. There's no point in wasting your time on a lead who doesn't know what they're looking for, right?
So what should you be considering? Utility needs, zoning, and other details could affect the leased space. By taking the time to understand what your potential tenants need, you can avoid complicated situations down the road when negotiating lease terms.
And don't worry - it doesn't have to be all business all the time. Take the opportunity to know your potential tenants and see if they'd be a good fit for your property.
9) Set a Time Frame
When renting out your commercial property, you want everything to run smoothly and efficiently. One way to ensure this is by setting clear and specific time frames. This will help you identify the best candidates and move them in as soon as possible.
However, it's important to be proactive and avoid potential issues down the road. If a potential tenant seems unsure about their plans or takes too long to decide, it may be best to cut them loose. It's always better to be proactive and find the perfect tenant rather than deal with complications later.
So go ahead and set those time frames and keep the process moving at a good pace.
Putting all together
As a landlord, ensuring you have quality tenants and minimizing risks for your commercial property is crucial. That's why the tenant qualification process is so important. It involves evaluating various important considerations for the property's safety and long-term benefits, such as verifying the tenant's business and income, conducting a background check, and demonstrating their rental history.
It's important to take your time and do your due diligence during the tenant qualification process. It may be tempting to rush through it, but it's always worthwhile to ensure you have a reliable and trustworthy tenant in the long run. If you need extra help, don't hesitate to reach out. You can contact me at 604.691.6622 or via email at mkurkdjian@naicommercial.ca, and I can guide you through the process and ensure everything goes smoothly.
So don't stress about it - take it one step at a time, and you'll be well on finding the perfect tenant for your property. Good luck!
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