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Investing in commercial real estate is advantageous because it yields higher rental income. Many property owners prefer leasing their commercial spaces to well-known franchises. While finding a reputable brand can be time-consuming, it's often more effective to search for major companies online instead of relying on local brokers.
What is a commercial property?
A commercial property is a building used for business activities, bought or utilized with the goal of making a profit.
Types of commercial real estate
Before investing in commercial real estate, it is essential to understand the types of commercial property and identify the right location for buying the property. Common types of commercial properties include:
- Retail store
- Office space
- Co-working space
- Warehouse
- Industrial building
- Restaurant/café
What is a franchise lease?
A franchise lease includes all agreements where a company or its subsidiaries allow a franchisee to rent, use, or occupy a property.
How to get a big franchise to rent your property?
Once you have invested in a commercial property, visit a real estate portal and list out your property by providing the details such as:
- Type of property
- Building type (business park, mall, standalone building)
- Super built-up area
- Location (main road or corner property)
- Floor details (e.g., 3rd floor out of 10 floors)
- Furnishing status (fully furnished, plug and play, etc.)
- Age of the property
- Locality details (street name, landmark and position on the map)
Specify the benefits to attract interested franchises. These could include:
- Expected rent
- Deposit
- Lease duration and lock-in period
- Date of availability
- Property is best suited for (restaurant, retail, office, etc.)
- Pictures and videos of the property
- Amenities, such as power backup, parking, security, etc.
Things to consider to make the listing standout
- Specify the address of the property, mentioning the exact location and landmarks. Post pictures from different angles.
- Describe the location advantages, such as proximity to public transportation, upcoming infrastructure projects, market hubs, etc. Mention reputed tenants and footfall counts.
- Describe the type of property (showroom), floor, property configuration, size and super built-up area.
- Add information on furnishing status, age of the building and the lock-in period for the lease.
- Specify the rental amount and lease period along with the security deposit.
- Add details of available amenities and facilities (elevators, parking spaces, furniture, CCTV, security features, intercoms, gadgets, etc.)
- Clarify the availability date
- Add a video if possible
One should note that franchisees have their franchise lease agreements that they want showroom owners to sign. One should be careful when entering into these agreements and get the documents examined by a lawyer.
Key aspects of a commercial property when leasing or renting out
- Is the showroom located in the right location to attract a big franchisee? Is it in a high footfall zone, such as an established commercial area or transport hub?
- What is its proximity to transit points, retail outlets and residential areas?
- Is the property the right size for the outlet of the franchisee? Big franchises have specific regulations on sizes, types and amenities in their outlets.
- Does the location have the customer profile that reputed franchisees require?
- Will the owner be required to make repairs or be allowed to make additions or modifications to attract big franchisees?
- Will the owner offer flexibility in terms of signage and branding along with the required space?
- Will the owner offer exclusive usage rights to the showroom and other zones (If leasing the property to multiple tenants)?
- Is there a facility management or supervision structure for managing commercial assets after the big franchisee takes over?
Why invest in commercial real estate?
- Long-term capital appreciation.
- Low borrowing rates and rapid cost appreciation.
- Owing to the presence of multiple tenants, one is not dependent on one tenant for monthly income.
- Tax benefits under Section 24 of the Income Tax Act of 1961 on loans for the purchase, construction, repair or reconstruction of property.
Ways to attract big franchises to rent your property
- Promoting on Social Media: Using social media for ads offers a broader audience reach compared to billboards. Utilize platforms like Instagram, LinkedIn, and Facebook, sharing captivating images and video tours to provide comprehensive property details.
- Networking with Real Estate Associations: Joining commercial real estate groups expands your connections and aids in finding reputable tenants. By engaging with franchise owners and accessing valuable resources, you establish credibility within the commercial real estate community.
- Billboard Advertising: Traditional billboards remain effective in commercial real estate promotion. Craft an attention-grabbing tagline highlighting property benefits.
- 3D Virtual Tours: Enhance property visibility through innovative 3D virtual tours on real estate websites, offering immersive experiences for potential tenants.
- Hiring Commercial Real Estate Experts: Engage commercial real estate brokers for leasing and selling properties. Their expertise ensures smooth transactions, with fees typically contingent upon lease completion, alleviating upfront costs for property owners.
How to rent a commercial property?
- Validating Title Ownership: Review the property title document thoroughly to ensure there are no sub-rent or other rent-related issues associated with the property before committing to a lease.
- Understanding Power of Attorney: Examine the title deed and commencement certificate to determine if the property is still under construction. Verify the occupation certificate for rented commercial spaces in completed properties. If there's indirect rent involved, clarify any power of attorney arrangements.
- Renting Agreement: Before entering a rental commitment, ensure the rental arrangement aligns with your operational needs. Confirm the nature of the rent and whether you're signing a traditional lease or a co-working office space agreement.
- Verification of Taxes and Mortgages: Check the property owner's income tax history to identify any disputes or legal issues. Understanding the property's classification as commercial or residential under the Income Tax Act of 1961 is crucial to avoid future Tax Deducted at Source (TDS) assessments.
- Background Check of Property Agents: When engaging a real estate agent, conduct a thorough background check. Request information on past clients, and if agents are hesitant to share, it may raise concerns about their integrity.
Aquire Acres.com News Viewpoint
Before finalizing a lease agreement, it's essential to carefully consider all terms and conditions. This includes aspects such as the lease duration, renewal options, rental adjustments, payment amounts, security deposits, as well as the repair and maintenance responsibilities for both the landlord and tenant.
Also Read: Commercial vs Residential: Which investment is better for rental income?
Ans 1. The arrangement in licensing a brand must include a license agreement, and the agreement gives authorization to another party to market a service or product. The licensee rents or leases the brand from the owner, which is the person who manages the license program (the licensor).
Ans 2. Where to advertise commercial property for rent? Apart from Nobroker, there are several other websites and platforms where you can advertise your commercial property for rent, such as 99acres, MagicBricks, and CommonFloor. You can also reach out to local real estate agents or use social media platforms.
Ans 3. Franchise models that offer the highest return on investment are those that have a proven track record of success, a strong brand name, and a loyal customer base. According to Franchise Direct, some of the most profitable franchises models include McDonald's, 7-Eleven, and Dunkin' Donuts.
Ans 4. There are certain characteristics that successful franchisees must have. They have to be resilient, able to follow a proven system, be a team player and unafraid to take risks, take accountability, and be organized. To find out if franchising is a viable path for you, consider speaking with a Franchise Consultant.
Ans 5. You can do this by visiting their branches, calling their customer service numbers, or sending them emails. When you contact the banks, be sure to introduce yourself and explain that you are interested in renting your property to them. You should then provide them with a copy of your proposal.