Many businesses had lost revenue, and can not pay the commercial rent to the landlord on time. Many landlords do not know what to do next to minimise their rental losses.
There are several methods. One is to work with the tenant to reduce the rent, however, if you are doing this method, it is critical you understand the tenant’s business model and seeing whether they have steps in place to recover from the downturn. At EndureGo Tax, we would be able to work with your tenant to know whether we can assist them in turning their business around. Hence the company can make the necessary profit to pay the rent to the landlord.
Secondly, the landlord can approach a litigation lawyer to sue the tenant for failure to pay the rent. As the most experienced and professional accountant and tax agent in Inner West Sydney Ashfield and Ashfield, we would not recommend this step without considering or contemplating on the first one. The second method is costly, involving a large amount of time and legal cost, which might or might not be recoverable. Also, the amount of the cost you spend on the lawyer, depending on the situation, sometimes it is not possible to be categorised as a deductible expense.
Thirdly, the landlord can evict the rental property out, and leave the property vacant. As the most experienced and professional accountant and tax agent in Inner West Sydney Ashfield and Adelaide, we would caution you over this method. The mere act of leaving your property vacant will send a strong signal to the market place that your property might be unwanted, as commercial property is all about Location, Location, Location. If the property is left vacant for a long time, then negative thought process will come in when people are looking to rent the commercial property in the surrounding area. Also, if you leave the property vacant, all of the holding cost for the property can not be deductible, as there are no income-producing activities.
Many commercial landlords when they want to rent out the commercial property, they always want to rent the property out at the highest possible price.
If a tenant offers $1000 per square meter, and another tenant offers $1050 per square meter, most landlords will then get their little calculator and compute and work out the sum, and most likely they will choose the one with the highest rental price. However, is it the correct way to go to maximise the value of your commercial rental property?
Commercial rental property is different from a residential rental property in ways that for a residential rental property, there is always a demand for it. People need a roof over the top of their head to sleep in, hence if they like your location, and the property, but might be a bit fuss over the rental price, all is to do is to negotiate. For residential rent, usually, people will want to pay the rent on time, else they might not have a rooftop on their head to sleep.
For the commercial property, people only want to rent the premise to run the business, and they will only want to continue to rent if the company is making money. There is sufficient money for the food for the family.
Many landlords who chose the highest rental price now face a dilemma, which is if the business model is not sound enough. With the slight or significant change in market condition like COVID19, the business will crumble. If you have not identified the risk, then you are unaware of the danger when the risk eventuates, the effect of the risk to the net profit of the business will become exponential.
At EndureGo Tax, as one of the most professional and experienced accountants and tax agent in Ashfield Inner West Sydney and Adelaide, we will be able to provide a specialist tenant screening package to your landlord. We will work with the agents of your choice and interview the potential tenant who wants to rent your premise; we will do a preliminary interview to perform an initial risk analysis to determine the followings
- Their business model, and viability of the business model
- Their experience in the business, and why did they want to exit from the previous rental place
- We will review their financial statement and form an opinion and report to you
- We will perform a risk analysis to ascertain the operational risk, financial risks and ascertain ways to mitigate them.
If you would like our Tenant Risk Review Service, please let us know, drop an email to firstname.lastname@example.org, or simply give us a call on 0410829900.