When co-working first ventured into the real estate industry, landlords had little or no form of direct involvement in the business. Instead, co-working providers simply dotted the lease lines and sublet the space to co-working tenants who then pay for individual desks, offices, and conference rooms.
The revenue incurred by the subtenants exceeded the rent and operating costs paid by the co-working space provider to the landlord. This somehow introduced a lot of risks where co-working users were only committed to short-term contracts while the co-working spaces were entangled with multi-year leases.
However, a good number of co-working space providers are now plying a different route. With co-working becoming a well-known solution for some tenants, providers are beginning to see the benefits of working more closely with their landlords.
In recent times, instead of leasing the space directly, co-working providers are initiating well-defined management agreements with landlords. This is an arrangement where the provider shares revenue with the landlord. Agreeably, these agreements give room for greater ROI for the landlord while reducing the amount of risk assumed by the co-working company.
This is becoming a preferred choice for co-working space providers because it transfers certain risks to the landlord and keeps them eager to protect their investment. From physical damage to the property to insurance claims, all these risks are transferred to the landlord.
Tips for Landlords to Reduce Risks With Coworking Tenants
The only thing necessary is to understand where you are vulnerable as a landlord and then take commonsense steps to minimize that vulnerability. Generally speaking, here are some of the top tips and tricks for removing risks with co-working tenants:
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Create A Solid Rental Agreement
First and foremost, you mustn’t accept a partial payment, and you should consider an online payment portal to avoid cash-paying tenants. If a tenant is looking to deceive you, at this point they will run because they know you’re confidently protecting yourself. Always remember that it is your property, and it is your rules.
It is also advisable to be clear with your rental terms before the co-working tenant moves in and make sure they understand what you will and won’t allow in your property. Include these terms in your lease and ask your tenant to initial them as proof of agreement.
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Don’t Show Signs of Long Term Vacancy
When dealing with co-working tenants, it is very necessary not to show signs of long-term vacancy because this will put you in a disadvantaged and vulnerable position.
Have it in mind that some tenants know how to leverage the system in their favor and won’t mind duping desperate landlords willing to relax their guidelines just to get their vacancy filled. When a prospective tenant requests to know how long the space has been vacant, you should let them know it has not been long and what’s crucial is finding the right individual that meets your criteria.
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Acquire Adequate Insurance
Acquiring well-tailored insurance policies on a rental property will surely guarantee coverage for accidents and physical damage to the property. There are three important types of insurance for rentals:
- Personal liability insurance: This protects against violations of fair housing laws and injuries caused by conditions on the property, such as slip-and-fall accidents, criminal activity, and hazardous material.
- Property insurance: This sees to structural and physical damage to the property.
- Rent insurance: Pays back the landlord for lost rent when the property becomes uninhabitable because of a natural disaster or a tenant’s actions.
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Everything Goes In Writing
In this sort of business dealing, everything must be in writing. It is commonly said in real estate that anything not in writing doesn’t exist. This is the truth and should be remembered at all times.
Even though it can be tempting to quickly get the lease agreement to a new tenant, it is vital to ensure everything is included. From the number of people allowed in the space and what activities are permitted, to when rent is expected to be postmarked and how delinquent payments are handled. Only what’s in writing is enforceable.
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Understand Security Deposits
Security deposits have landed a lot of landlords in trouble. When drafting a new lease, ensure to note all the stipulations in terms of security deposit and how you will handle reimbursement. Before ending a tenancy, take your time to let the tenant know how the security deposit will be handled, and be sure to provide an itemized deduction list when returning the deposit.
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Set Your Rent To A Competitive Market Rate
When setting your monthly rent, it is vital to ensure that your rates are competitive with similar properties in the same location.
Rental rates that are too high may discourage potentially good tenants who feel they can get better rates for similar properties in the same location. When it is too low, even good tenants may be wary, mainly because it sounds too good to be true.
When dealing with co-working tenants, always research the average rental rate for your market and set a rate that is just slightly lower or add some value. A few dollars less than the average may be adequate to draw in the right tenant. To get average rental rates, you can visit Zillow.com in the US.
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Pay Attention To The Property
As a landlord, especially with co-working tenants who can’t afford to stay close even for a day, waiting until something happens means it is already too late. To ensure that your tenants stay in business, you have to keep up with property maintenance and ongoing issues. If something is broken or potentially hazardous, have it inspected and take care of it.
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Make Friends With Repair People
Maintenance, repairs, and other complaints all fall within your scope of responsibility as the landlord of a rental property. When you are out-of-town, you have to find other ways of dealing with these situations. Connecting with a handyman, electrician, and plumber can be a good and easier way to seek solutions.
If there is a leak or electrical problem that needs to be fixed immediately, you can call on them to get the job done and bill you later.
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Communicate Often
Sometimes it simply comes down to personal interaction. By developing a reputation as an honest, accommodating landlord, you can build trust with tenants. As a landlord, it is also your job to initiate regular communication with your tenants by phone, email, or text message, and maintain this line of communication throughout their tenancy.
You should also provide them with numerous contact methods, as well as additional contacts, such as your proxy landlord, and ask the same from them so you can contact each other in the event of an emergency.
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Consider a Property Manager
Managing a rental property especially one with commercial tenants and balancing other aspects of your life, including work, family, and friends, surely warrants top-notch time management and a huge amount of patience. Have it in mind that efficiently attending to your property can save you money, but it also costs you time in the process.
Owing to that, you should consider a property management company to oversee your rental. Although it might increase your overhead, but it can also be the right option if you are not interested in managing the suite directly.