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One of the biggest expenses many businesses have to deal with is the cost of leasing space for their business. Getting familiar with what the lease covers and which sections are negotiable can save you money and frustration. Here are important factors to consider when considering your space needs.
Affordability
Since leasing costs are one of the largest items in your budget, spend time looking at different locations and then comparing the pros and cons of each.
Using a spreadsheet to compare variables is helpful. The items to account for are:
Now is the time to learn how to read a lease. Ask your accountant, insurance agent, lawyer, or broker for help. Commercial leases are not easy to understand. Some are even hundreds of pages long.
Factors that impact your total leasing costs, include:
After you get a handle on how much these additional costs will add to your monthly lease payment, compare it to how much you can afford. The rule of thumb is to spend no more than 10% of your projected gross revenues. That means if the rent is $3,000 a month, you need to generate $30,000 a month in revenue to afford it comfortably.
Lease Terms and Negotiable Items
Much of what is in a lease agreement is negotiable. That is why it makes sense to hire a broker.
Find an experienced agent who understands the local market well. You want one who works for you, not for the property owner. Make sure that the same time they represent you, they do not also work for a competitor or someone who needs the same type of space as you.
Your agent can help you negotiate a deal that fits your budget. Here are the areas that are open to bargaining:
Other Caveats
Surprises cost money when it comes to leases. It is not uncommon for a business owner to call the landlord when the roof leaks into the IT department and get the reply, “That is your responsibility. Didn’t you read the lease?”
Any legal document running to tens or hundreds of pages needs expert analysis. Find a reputable real estate attorney experienced in your property needs. Since leases typically run five to twenty years, you want to have a qualified professional make sure it benefits you. It is an investment in the future of your business, as well as your peace of mind.
Getting the best deal on a lease means finding a broker, researching the market, comparing properties, and having an experienced real estate lawyer check it before you sign it. Investing time now can save you a bundle in the years ahead.