Being a landlord can be a lucrative endeavor. People always need housing but there aren’t always houses available for a landlord to buy. However, there are alternatives if you keep an open mind and know where to look. For example, commercial real estate is an option. You could try renting out storefronts but these do have limitations in that you can only have one business there at a time. Plus, depending on the business, you may have to do some degree of remodeling if/when a tenant leaves. Another option is renting out offices.

While some office-landlords rent out to companies long-term, a more modern innovation is short-term rentals. They rent out day-to-day or by the hour. This can help get in the business. I’ll show you how to deal with this new type of office holder and its advantages.

• Learn Your Responsibilities as A Commercial Landlord
• Acquire or Building a Property and Bringing It Up to Code
• Furnish and Maintain the Property
• Get and Keep Tenants
• Short-Term and Long-Term Tenants

Learning Your Responsibilities As a Commercial Landlord

Whether you’re renting out for short periods or a year at a time, many of your rights and responsibilities are the same. As a landlord, you have certain rights, like the right to expect the rent to be paid on time, the right to control (to a certain degree) what happens on your property, and the right to not renew leases when the contract is up. However, even though you are dealing with people renting for shorter periods, you also have legal obligations to your clients. You have to make sure that your building is safe to inhabit. This means fixing anything that might be a structural hazard, such as wiring or plumbing issues. You must also handle things like providing commercial property insurance.

Even though you’ll be dealing with short-term renters, you still have to deal with laws governing real estate. Among other things, you can’t discriminate against tenants based on things like race or gender. You will want to consult with a real estate lawyer before drawing up your terms of service and leases.

 

Acquiring or Building a Property and Bringing It Up to Code

The cost of your property depends on several factors. These include the local area. Buying a single-story office building is going to cost more per square foot in the Eastern U.S ($300-$360) than it would cost in the South ($237-$286)  or Midwest ($237-$288). If you add in more stories, you’ll be looking at $400-$700. High-rise buildings will cost more.

Another factor to consider is the age of the building. If you’re buying a brand new building, you can conservatively add $10-$20 per square foot to your estimate. Older buildings might seem like a good idea but if you go too old, you might have other problems. Older buildings can have serious structural problems. They may also need to be upgraded to have things like air conditioning Wi-Fi. The wiring may also need to be looked at. Especially if your tenants will be using a lot of electronic equipment. Generally, if you want to save money, you should go for a middle-of-the-road building that doesn’t require too much repair.

Things like mid-rise buildings will need certain other upgrades. The Americans with Disabilities Act requires the areas of a business meant for the public must be accessible (this is one reason older buildings can be expensive).

Building a building is often more expensive even in a lower-cost area. On average, you’d be looking at $313 per square foot for a one-story office building. This does not include expenses like labor which can vary.

Looking for a property can be a challenge. You can find listings on sites like Craigslist deal with realtors, who will often charge you around 5-6% of the property. The cost of the property can vary even in a local area. As a general rule, office property can be harder and more expensive to acquire downtown and in other commercial hubs in a local area.

Depending on the area and the building, bringing things up to code can be a major expense. One of the expenses is getting the local building inspector to come out. The expense of this can vary based on the local area and size of the building. On average, an inspector charges 16-30 cents per square foot.

Want to know how you can get funding for your small business?

Furnishing and Maintaining the Property

Since you will be dealing with a lot of rotating short-term office users, you’ll probably want to make your layouts uniform. This way everything is consistent and your clients always know what to expect, This can be expensive for you. You’ll be looking at things like office chairs, computers, desks, etc. On average, a full build-out can cost between $50-$150.

Maintenance will be another matter. Typically, minor repairs and carpet/floor cleaning would be left to a tenant. While this might be reasonable for people renting every month, this is not as doable for someone renting daily or for a few hours. In these cases, you as the landlord will be responsible for these minor issues and the bigger issues like wiring, ventilation, and if applicable, elevators. You should keep; lines of communication open between you and your tenants to know what’s going on, your tenants need to inform you. It can be hard to give a raw number on how much you’ll need to spend on repairs since there’s no way to know how or what will need repairing. Typically, older buildings will have more problems.

Getting and Keeping Tenants

Getting businesses is often a matter of keeping a good reputation. This means not being an absentee landlord. If there is a problem, you should be prompt. You should also charge reasonable rents for what you offer. You shouldn’t have the rent too high and price yourself out of the market. But you can’t have them too low. People will get suspicious.

Once you build up credibility as a landlord and start making money, you’ll find it easier to get more properties.

You can notify people of available space on the Internet on sites like Craigslist or by hiring a realtor.

The Advantage of Short-Term Tenants

Some businesses need long-term offices (year-to-year). Getting a major established business to rent your offices can be hard. People renting in the short term can be a good way to make money and gain credibility as a landlord if you ever want to start renting out a property on a long-term basis. Some start-ups only need offices for a few hours a day or on a month-to-month basis. These cases can provide you with a lot of quick revenue. These types of tenants often need offices for things like conference rooms or a quiet place to work.

These tenants tend to be small so you can rent out to multiple businesses at the same time. Sometimes, businesses will share the space at the same time so you can have multiple businesses there during the day. Other times, they’ll rotate. You must make it clear that each business is responsible for keeping track of their things and following the terms you lay out.

Frequently Asked Questions

1. What are some things I can do to help my tenants be successful?
Your tenant’s success is their responsibility. However, you can help by keeping the property up. Do things like make it handicap accessible to avoid ADA lawsuits for example.

2. What are some services I should offer my clients?
Some short-term businesses need things like notary services and mailing addresses for their business. You may want to take a notary class so you can offer notary public services or have a couple of people on staff who can do the same.

To learn more on how to plan your own office space rental business click here!

Please note that the contents of this blog are for informational and entertainment purposes only and should not be construed as legal advice. Any action taken based on the information provided in this blog is solely at your own risk. Additionally, all images used in this blog are generated under the CC0 license of Creative Commons, which means they are free to use for any purpose without attribution.