By Pradeep Mishra
In today’s landscape, numerous entrepreneurs and investors are entertaining the notion of procuring commercial properties that are already under lease. This subject holds considerable significance and often fuels impassioned discussions. Let’s embark on a simplified exploration of this topic.
Investing in a pre-leased property presents several advantages. Firstly, it bestows ownership of the property upon you, granting control and access to various amenities. This enables you to tailor the property to your preferences—an aspect that may prove challenging when navigating the territory of a traditional landlord-tenant relationship.
Beyond this, this investment avenue has the potential to be financially rewarding. Through rental income, a consistent stream of monthly revenue is assured. Additionally, a promising prospect for the property’s value appreciation over time unfolds, offering the possibility of capital growth.
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Nonetheless, a note of caution is imperative. Prudent decision-making is key. Conduct a thorough assessment of the property’s condition, validate ownership details, and scrutinize the lease agreement’s stipulations. Acquaintance with legal protocols and requisites is indispensable.
For those with entrepreneurial aspirations, acquiring a pre-leased property amplifies avenues for growth. If your venture is already operational, a stable income stream is guaranteed, bolstering your investment capacity.
Key Considerations when Venturing into Commercial Properties with Existing Tenants:
Type of Lease: Distinguish between assured returns and rental income. In rental income models, tenants provide monthly payments, while assured returns involve the seller or developer disbursing rent—often encompassed in the property cost.
Smooth Transition of Payments: Ensuring the correct transfer of security deposits and advance rents paid by the tenant underpins the transaction’s integrity.
Validity via Registered Lease Agreement: Prioritize the registration of the lease agreement to confer legal authenticity and safeguard interests.
Lock-In Period Assurance: A lock-in period cements the assurance of a minimum guaranteed income from the tenant, bolstering financial stability.
Sift Through Agreement Details: Rigorously comprehend each clause of the lease agreement before finalizing the transaction—an act that underscores prudence.
Strategic Property Location: Evaluate the property’s location strategically. Should the property return to vacancy post-lease, the potential for re-leasing at similar or higher rates should be contemplated.
Essential Infrastructure: Assess the presence of crucial utilities, including electricity, water, and efficient drainage systems within the commercial space.
Reliable Power Backup: Confirm the availability of power backup mechanisms offered by the supplier or developer for the property’s sustained functionality.
Anticipate Transfer Obstacles: Be vigilant about potential transfer objections or requisites that might emerge before the lease tenure concludes.
In addition to these facets, diligent due diligence remains paramount. Enlisting legal and real estate experts for guidance can pave the way for a seamless and triumphant property acquisition.
Investing in a commercial property with incumbent tenants indeed constitutes a shrewd move. However, it necessitates meticulous attention and a clear comprehension of the terms and consequences. By taking into account the aforementioned aspects, an astute and well-informed decision aligned with your investment goals and business strategies can be realized.
Please bear in mind that this information seeks to provide a comprehensive outline and should not be a substitute for tailor-made expert advice relevant to your distinct circumstances. Always exercise the prudence of consulting professionals before undertaking significant investment commitments.
(The author is Founder, Homents Pvt Ltd)
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