Renting out a commercial property can provide exponentially higher income than a residential property. This is a double-edged sword, though, as vacancies hit much harder. Due to supply outpacing demand, commercial property vacancies have risen to approximately 4%.
It's crucial to conduct lease audits to optimize cost recovery as a commercial property owner. This is also essential for maximizing revenue.
We've created a brief guide that outlines the key information you should know. Let's explore how to handle a lease audit and cost recovery effectively in Fairfax, Virginia.
Understand Your Rights
A common mistake commercial landlords make is overlooking their rights. Owners can legally charge tenants for money to recoup various expenses, such as insurance costs, taxes, and renovations.
Not only does this make property ownership more profitable, but it also clears ambiguity. Owners should specifically define the expenses they pass to their tenants.
It may be worth working with a legal professional to help you better understand how to create the ideal lease. The last thing you want is to overlook opportunities due to a lack of knowledge.
Look for Documentation Inaccuracies
You should thoroughly review each lease agreement you provide to your tenants. Do your best to discern inaccuracies and make the appropriate changes as soon as possible.
While it may be tedious, you might need to repeat this process multiple times. The good news is that once a lease has been optimized, you can continue to use it in the future. If conflicts arise, the lease will likely only need minor changes.
Establish a Fair Resolution System
Unfortunately, issues can and do arise when you rent commercial property to tenants. Effective property management strategies always have fair resolution systems.
To clarify, there should be guidelines in place that dictate how to handle problems that occur. You have plenty of flexibility regarding the terms you set.
Aim to find a balance between leniency and strictness. Going too far in either direction could make it more difficult to find long-term tenants.
Have an Accurate Billing Process
Streamlining the billing process is a crucial obligation commercial property owners have. Using automation is a great way to help you manage this responsibility. The same can be said about using artificial intelligence (AI) when appropriate.
In context, you could automatically bill your clients each month, add necessary late fees, and receive notifications when clients pay. This is especially useful for owners who manage multiple commercial properties.
Reaching out to a large number of tenants each month to collect rent can be exhausting. It can also cause friction in your relationship with them.
Don't Ignore Lease Audit and Cost Recovery
Without a proper lease audit and cost recovery strategy, you risk falling short of your income goals. As long as you look for inaccuracies and understand your rights, you shouldn't encounter issues.
PMI of Fairfax is a full-service real estate asset management company. We strive to make each of our client's lives as easy as possible by streamlining their ownership responsibilities. You can learn more about the other benefits we provide by scheduling a free rental analysis.
