5 Warning Signs to Watch for in a Potential CRE Tenant
There are commercial real estate tenants that make leasing easy – the ones that are committed for the long-term, that treat your property with respect, and that provide value. On the other hand, there are tenants that elicit complaints, push the boundaries of their terms, and generally detract from your property’s value – or worse, break their leases entirely.
The need to find a valuable, and responsible commercial real estate tenant remains crucial.
Let’s look at a few early warning signs that will make you want to look deeper into your potential commercial real estate tenant’s history.
Are They Pushing for Short-Term Leases?
When potential commercial real estate tenants are indicating that they want a one-to-two-year lease, that is an immediate flag. Make sure to dig into the details of this in order to be fully informed on this push. It may be simply because they don’t know the location they plan to settle in for long-term (which is a problem in itself). However, it may also be that they don’t want to commit to a lengthier lease due to a cash flow problem or a business instability.
The last thing you want is for a business that is ill-equipped and inexperienced to move into your commercial real estate property and only stay a year or two. Many times, this will end in the breaking of your contract due to an inability to comply. In result of that, you will be immediately brought back to square one.
You do not want to go through that process multiple times over when, after doing the process right the first time, you could gain a steady tenant for 5+ years.
Do They Have Insufficient Finances?
As mentioned earlier, insufficient funds or a desire to cut a short lease should immediately raise concerns. This should not be a debate.
For starters, if the commercial real estate tenant cannot pay the security deposit, you know there is a cash flow issue. One way to avoid this issue and have a more thorough check in the beginning is by obtaining letters of credit and running a credit check prior to signing. This should be standard; it’s a great way to track the potential tenants and business’ income, credit score, cash flow, and other important financial details.
A credit check will provide you with detailed information on the potential tenants past addresses, other names used, credit score, loan information, and possibly even past employer information. This is a step that is crucial in the commercial real estate tenant screening process, so do not skip it!
Do They Have a Negative History with Previous Landlords?
After obtaining information from the credit check on previous rentals or home ownerships, contact the potential tenant’s previous landlords. Dig around to see what the general feeling of the potential CRE tenant is. If there are any weird feelings, negative feelings, or strange answers to questions – that tenant may not be worth the hassle.
Negative history such as tenants not paying their rent on time, causing excessive noise, or damaging property, are all reasons to deny the potential renter. These issues give you clear reason to re-evaluate the potential tenant. Having a business or company move into your commercial real estate property when they are not equipped to handle the general guidelines in the contract is a mess you do not want to deal with.
Lastly, it wouldn’t hurt to throw in a quick Google search for their name to see if anything notable appears. It is surprising at times to see all of the personal information that is on the web for anyone to see.
Are They Too Friendly?
Listen to your gut on discrepancies or unsteady feelings from your potential tenants’ history, information, demeanor, etc. If the commercial real estate tenant you are interviewing seems too good to be true, don’t immediately dismiss those thoughts. That may very well be the case.
You don’t want to mess around with signing a lease with a possible trouble tenant, and consequently pass up on many other trustworthy tenants.
Are You Feeling Overwhelmed? AushCo Is Here to Help.
As important as this CRE tenant screening is, don’t let the process intimidate you. Yes, the stakes of finding great tenants are high – leases can go a long way toward impacting the success of your property investment. But there are good people who can help you navigate the process. Going it alone will cause unnecessary stress, restrict your access to industry knowledge, and may result in a failure to maximize the leasing potential of your building.
Hiring a property management company means you don’t have to worry about the nitty gritty of vetting tenants. At AushCo, we offer customized guidance through the tenant search so that you can trust you’re accessing the right knowledge and taking the right steps to find the best tenants. You’ll have a person to call for everything.
And at the end, you’ll have a leased building that maximizes its value.
By choosing to work with us, you can have confidence in finding great tenants without the stress of going it alone. To take the first step toward successfully leasing your commercial property, get in touch with us today.