How Tenant Representation Increases Property Values and Profitability
harkins / March 29, 2017
The commercial and residential real estate markets continue to evolve as demographics and technology shift the investing landscape. With longer life expectancies for baby boomers and the unique lifestyles Millennials lead, real estate investors must refocus their investment strategies to gain a competitive advantage and drive bottom-line growth. In today’s technological, social and economic climate, tenant representation is the key to finding properties with increasing values and maintaining profitability. Tenant reps understand the pulse of the real estate market and target specific demographics using advanced technology specifically designed for the real estate industry.
Tenant representatives turn both commercial and residential properties into strategic assets. A strategic asset in real estate is any property that determines the future profitability of any investor. Strategic assets include rental properties that generate positive monthly cash flow, properties with increasing values or buying under-performing commercial real estate or distressed properties for pennies on the dollar. Tenant representatives help investors turn their real estate investments into a balanced portfolio of strategic assets.
Tenant representatives work in the best interests of the real estate investor. When it is time to negotiate with the seller, tenant reps will broker a deal with the sellers and the seller’s agents that are in the best interests of their clients, and not the interests of the sellers or seller’s broker. This is a critical fact for newer investors since tenant reps eliminate the hassle of negotiation and site selection. Inexperienced investors face the potential of disastrous missteps costing them thousands of dollars at the closing table. Those missteps instantaneously decrease the available equity in any investment property.
What to Expect From Tenant Representatives
Proactive tenant representatives do more than negotiate the best possible deal for their clients. Tenant reps work as investigators trying to seek out the best possible properties for their clients. They also work as buffers between developers, landlords and their clients. Most importantly, tenant reps are experts at creating bidding wars between developers, and how bidding wars optimize their clients negotiating positions. Here is a breakdown of what investors should expect from professional tenant representatives:
Analyze an Investors Space Needs- Expert tenant representatives calculate precisely how much commercial space their clients need. The key here is the reps prevent investors from leasing extra space that reduces a client’s ROI, which is an investor’s return-on-investment. Keep in mind that landlords and developers have no interest in helping investors economize space.
Settling Disputes- Proactive tenant representatives are experts at settling disputes. They work as the eyes and ears for their clients. When a dispute arises over any transaction, tenant reps will verify the specifics of the transaction and provide documents to confirm what was agreed upon during negotiations.
Identify Lease Provisions- The best tenant reps have an uncanny ability to identify lease provisions that could cost investors’ money during the lease term. Essentially, the best tenant reps in the business reveal the hidden fees associated with leasing commercial or residential properties.
Focus on Savings
Tenant representatives focus on saving money for their investors, and they accomplish this goal in several ways. One way tenant reps save money for investors is by safeguarding their clients from signing any lease that goes against their economic interests. An example would be an increase in tax and operating expenses passed on to the investor throughout a base year. Tenant reps will identify the correct base year and ensure landlords don’t charge investors expenses from a different base year.
Tenant reps also help investors save money by negotiating the most value in improvement allowances. Expert tenant reps know the actual market price of properties per square foot. For example, an inexperienced investor may sign an improvement allowance of $35 per square foot when the actual market value is $25 per square foot. In this situation, a proactive tenant rep would know the real market value at $25 per square foot and negotiate that any remaining funds from the allowance would go towards rent or a reduction in rent.
Tenant representatives specialize in generating cost savings and selecting space. The goal of any professional tenant rep is to find a space that investors can use effectively and improve the profitability of a real estate investor’s portfolio of strategic assets. Effective use of tenant representation will help increase the value of any property.
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