HELP! MY PROPERTY IS VACANT, WHAT NOW?

Your prized investment property has just become vacant. Commercial tenants can remain in place for several years, so it may have been a while since you’ve been in this situation. But you’re here now, and vacant property costs serious money to investors. So what should you do when your property becomes vacant?

Below we outline 4 steps you should take the moment your property becomes vacant.

First, Set Yourself Up For Success

Let’s assume that your tenant has only just moved out. By being a diligent investor, or using a property management company, these three facts will be true at this point:

  1. You will have a thorough ingoing inspection report on file. This report will have documented the condition of the property at the start of the lease.
  2. You will have a watertight commercial lease agreement between you and the tenant which puts the burden of maintenance back onto the tenant.
  3. You will be holding a significant bond. Usually 3 months worth of rent.

(If you are missing any of these three elements, you may have put yourself into a less than desirable position. But each case is different, so get in touch and we’ll see what your options are)

Step 1: Prepare a Dilapidation Report

This is just a fancy way of saying a condition report. In particular, this report should compare the current condition of the property to its condition at the beginning of the lease.

At Nutshell, all properties receive a comprehensive ingoing inspection report. This report consists of hundreds, sometimes thousands, of photos recording every square inch of the property. Having a thorough ingoing inspection makes a comparison easy.

Your dilapidation report doesn’t have to be complex – just one page of dot-points outlining the things you want the tenant to fix. Ideally it should include a photo of the original condition and the current condition.

Tip: Check your lease for the make-good clause. Some commercial leases have allowances for “fair wear and tear” while other don’t.

We find that having this report makes it easy to deal with the tenant. Rather than arguing about opinions, sitting down with the facts makes for an easy discussion.

Step 2: Make-Good

It’s now time to act on your Dilapidation Report. “Make-good” is a way of saying that the tenant has to fix and damage they have caused. Depending on the scale and nature of the work, this can be done in two ways.

  1. You can ask the tenant to carry out the required work.
  2. You can carry out the work and deduct the cost from their bond.

Each case is different and I would recommend talking to your property manager before going ahead with either option.

Step 3: Speak To A Property Manager

At this stage, if you haven’t already, seek out the advice of a leasing agent or property management firm.

A Property Manager can give you a market appraisal and offer other advice on getting your property ready to lease. Furthermore, an agent offers many advantages over going it alone:

  1. Licensed agents have access to websites such as realcommercial.com.au which are not accessible to the general public. Realcommercial.com.au receives over 1.2 million visitors per month.
  2. Agents have a databases with thousands of contacts. For us, this database is the source of most of our leasing deals.
  3. With a portfolio of listings, agents “bounce” enquiries from one to another. For example, if someone calls about a warehouse nearby, we can suggest that they also view your warehouse.
  4. Commercial leases are complicated and it’s important to get them right. Qualified and experienced agents know what needs to be included to make sure you are protected.

When choosing a property manager, make sure you go with a company that specialises in commercial real estate.

Step 4: Make Your Property Stand Out

In the meantime, you should be going above and beyond to make your property stand out amongst the competition.

As a bare minimum, you should do the following:

  • Paint all the walls and ceiling.
  • Clean the floor. If it’s a carpeted office, have professional do it.
  • Fix any damaged fittings or inclusions. This includes things like taps, blinds, air-conditioning, windows, lights etc.

As we’ve already discovered, your outgoing tenant might be responsible for most of this. But either way, it’s important that it gets done or your property could sit vacant for a long time.

Now it’s time to start your property marketing campaign. If you have followed these steps you should be in a strong position to find a tenant, fast.

For more information on how to minimise vacant periods in commercial property, download a copy of our free eBook below:



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