Do you own property in the prime areas of your city? Are you hoping to generate income from it without the hassle of starting your own business? Well, there’s a way to earn money without diving into the complexities of running a business. That’s right—you can make a steady income from your idle property without the stress of managing operations. It’s secure, reliable, and straightforward. This blog will guide you on “how to rent out commercial property to a franchise” and make the most of your investment.
What Defines Commercial Property?
While residential property serves as a living space, commercial property refers to any premises used for business activities. It includes properties intended for profit generation. Given its profit-oriented nature, commercial real estate comes with unique regulations and laws that must be followed when renting or leasing.
Categories of Commercial Real Estate
Before investing in commercial real estate, you must decide two critical factors: the location and the type of property. Depending on your chosen property type, the location might also vary. Below are some types of commercial properties you should consider before finalising a business space for rent:
- Retail shops
- Warehouses
- Office spaces
- Industrial units
- Co-working hubs
- Cafes/Restaurants
- Other business spaces
What is a Franchise Lease?
Leasing your property to a franchise is relatively straightforward. Franchise leases include all rental agreements, subleases, or contracts where a company or its subsidiaries give a franchisee the right to rent, use, or occupy a piece of real estate. However, franchise agreements themselves are not considered part of franchise leases. Regardless of the type of franchise lease, as the property owner, you retain responsibility for the lease. It is crucial to understand the extent of your control and obligations when opting for a franchisor’s lease model.
How to Lease Commercial Property?
Outlined below are the steps to lease a commercial property effectively:
Validating Title Ownership:
It is essential to have complete knowledge of the property’s ownership, which requires accessing the title document. This helps confirm whether the property can be leased or rented out. Before entering into a rental agreement with the landlord, perform thorough research to ensure there are no existing sub-leases or other rental arrangements associated with the property.
Power of Attorney and Sanctioned Plans:
If the property is under construction, it is advisable to check the title deed and commencement certificate issued by relevant authorities. For completed properties, confirm the presence of an occupation certificate before leasing the premises. In cases of indirect leasing, clarify if a power of attorney is involved to avoid any confusion.
Proper Leasing Agreement:
Ensure the leasing arrangement aligns with operational requirements before committing to any agreement with the landlord. Whether it involves a rental lease or co-working space agreement, clearly specify the type and terms of the lease to avoid future misunderstandings.
Verifying Income Taxes and Loans:
For commercial agreements, reviewing the landlord’s income tax records is a wise step to uncover potential disputes or legal issues. This can also clarify whether the property falls under the ‘commercial’ or ‘residential’ category as per the Development Control Regulations in the Income Tax Act, 1961. Unclear categorisation could result in unexpected TDS deductions.
Background Check of Property Agent:
Conduct a detailed background check on the real estate agent before engaging their services. Previous rental deals and feedback from former clients can provide insights into their reliability. If the agent hesitates to disclose such details, it may indicate a history of untrustworthy practices.
Ensuring Validity of the Lease Agreement:
A business leasing agreement must include the following essential details:
- Start and end dates of the lease.
- Exact property location
- Total rent amount along with deposit specifics.
- Payment intervals.
- Terms for lease renewal.
- Names and signatures of all involved parties.
Why Do People Invest in Commercial Real Estate?
Many investors lean towards residential properties because they are easier to find and often seen as less risky. However, if you know what to look for, do thorough research, and decide to invest in commercial real estate, you can potentially earn higher profits compared to residential investments. That said, it’s essential to remember that commercial properties usually require a larger initial investment. Additionally, property tax rates for commercial and residential real estate differ, with each having its own set of pros and cons.
Managing commercial real estate investments can be tough. With CaptainBiz billing software, you can easily manage billing, track expenses, and handle taxes, making it simple to keep your property portfolio in check.
How to Attract a Big Franchise to Lease Your Property?
After investing in commercial real estate, the next step is to lease or rent it out to a reputable company or a large franchise, ensuring a steady rental income. To begin this process, you need to create a detailed property listing. Here’s what information you should include about your property:
- Type of Property (e.g., warehouse, office building, etc.)
- Building Classification (e.g., business park, mall, standalone structure)
- Super Built-Up Area
- Floor Details (e.g., third floor out of seven, basement out of two, etc.)
- Furnishing Status (e.g., fully furnished, plug-and-play, etc.)
- Age of the Building
- Location (e.g., corner property, main road)
- Neighbourhood Details (e.g., street name, landmarks, and map positioning)
Once the basic details of your property are listed, share rental expectations and highlight the advantages that your commercial space offers to attract franchise interest. Here’s what else you need to specify:
- Expected Rent
- Deposit Amount
- Lease Duration and Lock-in Period
- Availability Date and Best-Suited Purpose (e.g., restaurant, retail store, office, etc.)
- Visual Content: Add high-quality images and videos of the property (better visuals attract more interest).
- Amenities Offered: Mention features like power backup, parking, security, and other facilities.
Additionally, describe your property in detail. Highlight unique features or benefits that set your commercial space apart from others in the locality.
Once all the necessary information is added, you can wait for the right inquiries. Many prominent franchises search online for ideal spaces. A well-detailed listing with clear information and attractive visuals ensures your property stands out and captures the attention of potential tenants.
Conclusion
Overall, renting your property to a big franchise can help you earn money without much effort. Just make sure you have the right papers and details about your property ready. Share clear information about your property’s features and location to attract interested tenants. This way, you can earn regular rent without having to run a business yourself.
Start using CaptainBiz’s free GST Billing Software to manage your business today and make your business operations easy for you.
Also read: The Importance Of Financial Planning For Entrepreneurs
Frequently Asked Questions (FAQs)
Can I Lease My Commercial Property to Small Businesses?
Absolutely! Leasing your property doesn’t have to be limited to large franchises. You can explore options with small, medium, or even large businesses, depending on the space you offer and whether your needs align with theirs. Many property owners tend to prioritise big brands or franchises, as these tenants are often seen as more reliable in terms of consistent income, reputability, and adherence to rental agreements.
However, this doesn’t mean smaller businesses will default on payments or breach agreements. As long as you have a robust and well-drafted lease agreement in place and perform thorough due diligence, renting to small businesses can also be a secure and profitable choice.
How to Lease Your Property to a Company?
In recent years, corporate housing has become increasingly popular. It involves renting out a furnished property to a company instead of an individual, offering the amenities and services similar to a hotel but without the housekeeping. Such properties are typically used to accommodate company employees visiting the city for extended stays, usually ten days or more.
With corporate housing, the property is leased by a company, and any employee travelling to the city for work can stay there. Depending on the size, location, and facilities provided, the organisation decides whether the property will house administrative staff or blue-collar employees.
How to advertise commercial property for rent?
To advertise commercial property for rent, create an engaging listing highlighting key details like property type, location, size, amenities, and accessibility. Mention its suitability for businesses like offices, retail, or warehouses. Include high-quality photos and videos to showcase the property’s features. Use online platforms, social media, and local property portals for maximum visibility. Highlight benefits like parking, security, or proximity to business hubs. Respond promptly to inquiries to attract and retain potential tenants effectively.
