Being a landlord is challenging, as there are many aspects involved. In addition, there is the choosing between whether you want to be a residential landlord or commercial landlord, as each come with their own array of requirements. Below are 4 points of interest outlining the differences between the two occupations.
#1: Lease Length
Generally, residential leases last about 1 year, with the currant occupants provided the option for lease renewal. Less common than an annual lease renewal, some landlords can arrange a 2 or 3-year lease with tenants, but because many renters move on quickly from houses due to personal situations, like the birth of another child, shorter leases are more common. Commercial leases, because they are for businesses, tend to take long-term leases, which benefit both the landlord and the business leader.
#2: Rent and Various Charges
Residential rent is, for the most part, very straightforward, with the details (how much you pay, when you pay) laid out clearly in the original lease. Residential rent is also governed fairly strictly so as not to overprice the land. Commercial rent is generally very flexible, and many landlords offer a time period with discounted rent so that the business can get on its feet. Because commercial rent is not governed in the same way, landlords can increase their asking rent over time, which, depending on how badly the business wants to stay in the particular space, will often be paid.
#3: Tennant Aspects
While residential tenants are likely to repaint or put in new flooring in the building being rented, it tends to be cheaper, as most renters do not stay for very long. Commercial tenants are even more likely to makeover the space to fit their business’s style, and while landlords often provide some financial support to both commercial and residential tenants, commercial tenets are more likely to stay in the building they spent so much on.
Residential collateral is most often the tenant’s security deposit, but if you end up having to evict a tenant, you can end up with massive property damage that exceeds the amount of the security deposit. For commercial tenants, you and the business leader can discuss how much collateral is ideal, which can be anywhere from 1 month’s rent to 6 month’s rent. In addition to money, you can take other things into collateral, like the work they completed on the building or a refund for any damage.
Regardless of whether you choose to be a residential landlord or a commercial landlord, always treat your tenants with the respect they deserve, and be the best landlord you can be. Work with your tenants to see how the relationship can be mutually beneficial.