Remember when you were in college and you had $100 to make it through the rest of the quarter with 45 days still left? Remember you would get creative in coming up with 10 recipes on how to cook Top Ramen that you would buy 10 packs for a $1. (I just aged myself). Top Ramen on toast. Top Ramen with the hot water, Top Ramen without the hot water., etc., Well, the situation may be similar, if not worse, for some of your tenants in your commercial real estate buildings. Many of them are on the brink of going out of business. So when the going gets tough, you need to revert back to your college mode and get creative to help save your tenants.
Commercial Real Estate Tenants can be tough to come by these days. With the vacancy rates down and businesses going under, it’s getting even uglier. One thing you might consider is helping your tenants do a little financial analysis. A quick look at their profit and loss statement may disclose that their rent is significantly hurting them. What’s that? It’s not your problem? It may not be yet, but it will be when your tenant closes his doors and goes bankrupt. In Kirkland, WA I have seen more and more vacant commercial real estate in the downtown area.
One solution is to look at your own rent roll and see if you can help some of your tenants while still staying cash flow positive on your commercial real estate. If you can afford to reduce the rent, you may approach your tenant and propose a temporary rent reduction while the economy gets back to normal. If they accept, you may have saved your tenants business. Or, worse case, you collect a little more rent for a few more months and the business goes under anyways. Either way, you can in good conscience say you did your part in helping them through this tough time.
If you have proper skills, you may also volunteer to help them analyze their business and/or promote their business. If you have a large building with multiple tenants, you may be able to provide contact information or set up a co-op marketing strategy that will assist your tenants in drumming up new business.
Keeping tenants is one of your ultimate goals as a landlord of your commercial real estate. The more you can do to help keep them in business, the more you are helping your commercial real estate stay occupied.
