Sunday, July 7, 2019

Advanced Tricks in Renting Rental Space

Starting up a business requires great planning and marketing research.  Indeed, getting the perfect spot may be a challenge. If you are a young-blood who wants to start your own business or a foreigner who likes to invest abroad, Cambodia is indeed a perfect location for you.  Here are some tips and tricks to win a favorable business lease.

  1. Choose the perfect lease structure
A commercial lease is about three years with longer and more flexible terms than residential rent.  First, the type of lease to enter should be considered. There are some lease structures provided by Clint Gharib, founder of The Gharib Group-Integrous Investing, in his Forbes article:
  • Single Net Lease, Net Lease – the tenant only pays for the utilities and property tax while the landlord covers the maintenance, repairs, and insurance of the unit.
  • Double Net Leases – like net lease, tenant only covers utilities, property taxes, and building insurance premiums while landlord shoulders maintenance and repairs.
  • Triple Net Leases – the tenant shoulders all costs of the building, except for structural repairs, which are covered by the landlord.
  • Full-Service Gross, or Modified Gross/Net Lease – Also called the ‘base rent’; the tenant and landlord share the costs for all structural repairs and operating expenses.
Depending on your business needs and finances, you may choose the best leasing structure for your company.  Of course, if you can negotiate for a lease that could cover all expenses, it would be much easier to manage finances.

  1. Corporate versus retail landlord
It is important to consider whether you are dealing with a corporation or private landlord.  It is hard to have flexible terms when dealing with mall authorities since their lease contract is already pre-set.  In contrast, you can easily negotiate with an independent landlord to better suit your needs.  Nevertheless, be careful with who you will be dealing with. 
In Cambodia, foreigners could not own property, so leasing could be the best option. However, you must ensure to deal only with the owner. A business applying for permits or licenses may be denied if they will be occupying a subleased unit. 

  1. Hire an expert 
A lease is a legal matter and a very critical process.  Hiring a real estate agent who knows the complexity and technicality of leasing could help you save a lot in the long run.  Such an expert can negotiate to get the most favorable deal for your business.

  1. Have all the details in writing
You may see various ads online and inquire on each of them on the phone.  However, it would always be legally proper to keep all information in writing, just in case the deal does not end well.  A written contract ensures you have a better understanding of all the details in the deal.
To secure your slot, of course, you would need to have a security deposit, which ranges from one to three months.  To ensure the lease contract is legitimate, Just Landed enlists the required details:
  • The property addresses 
  • The names of the lessor and lessee
  • The payment schedules
  • The amount of the security deposit received
  • A registry included in a furnished property
  • Right thumb fingerprints of the lessor and lessee as well as their respective witnesses, which act as a signature for both parties

  1. Always negotiate with the asking price
A landlord sets the price with leeway for negotiation. Make a counteroffer that is about 10% to 15% lower than the asking price. Then, work your way to settle with the number agreeable to both parties.  You may also research nearby rental rates to help you negotiate for a lower price.

  1. Do not settle for a single deal

Seeking the best location for your business means looking at multiple sites and weighing the pros and cons of each. One location may have a cheaper rental. However, another one may offer better lease options and perks. This would allow you to make the best decision and walk away with the best deal.

  1. Have an ocular inspection
While landlords indicate the floor area in ads, it is best to see the property for yourself to see the usable area for your business. Also, you can determine improvements you would need and make better plans ahead.
Checking the property also allows you to research about it. You can see how the existing businesses in the neighborhood are doing. You can ask around about the foot traffic, available parking space, nearby competition, and most importantly, the landlord’s reputation. Of course, you don’t want to get stuck in a deal with a difficult lessor.

  1. Longer lease, better price
Understand how property valuation works and you are guaranteed to get a better deal.

You may find a property with an already attractive price. However, you can even make it better. Usually, landlords want to have at least a year contract. Nevertheless, you may negotiate with your landlord for perks, discounts, and better renewal options if you are committing for a longer tenancy. 
Nevertheless, such may not be possible for small start-up businesses since the risk of failure is higher. A one-year contract with advantageous termination clause may be a better option. After all, the contract can be renewed once your businesses have stabilized. 

  1. Competitor, Renewal, and Penalty Clauses
Having no competition is ideal, although it may not always be the case.  However, having an anti-rival clause would be most favorable for your business.  This would hinder your landlord from accepting a rival within the building.

In addition, you need to check the renewal options in the contract.  You must learn to negotiate for a favorable term if you decide to renew your lease.  You may ask your landlord for certain discounts. If you intend to expand, having a priority clause for renting an adjacent unit is perfect.

Since you are signing a contract, always look at the penalties you may incur throughout your lease period.  Primarily, make sure to have a cure period to fix any breach in the contract like late rental payments.  Otherwise, you might find yourself dealing with legal implications. 

Also, check the termination clause.  While you may hope to keep the business for the longest time, it would be helpful for a start-up business to have a lower termination fee included in the contract.  After all, you do not know what may happen in the future.

Indeed, the lease process could be intimidating.  However, knowing some lease negotiation tactics makes it easier to get a promising deal for your business needs.

No comments:

Post a Comment

Related Posts Plugin for WordPress, Blogger...