This post just shows that you have never let out any real estate. Let me tell you, it's not as simple as this.
It's not just the 50$ or whatever to put up one online ad. You need to advertise on several websites plus offline. You need to show around various candidates, and do background checks on the serious ones. You have to transfer utilities, deal with mail, and other assorted tasks when somebody moves in. All of this for (in terms of yield) slim margins. And assuming that nothing is damaged or needs fixing up after somebody moves out.
Now, for commercial space it gets worse. When they go out of business, it's highly unlikely that you will recover the owed rent - likely several (2-3) months. Commercial real estate is vacant for longer, and having a tenant 'in between' basically 'resets' the cycle of getting a new tenant. (businesses take a few weeks to months before deciding, residential is usually faster, i.e. faster turnover)
Also, businesses usually make changes when they move in, not always for the better (network rewiring, dividing space etc for offices - for storefront it's much worse still). If they go bankrupt, you as the owner are stuck with the cost of repairing. The deposit (a paltry 2 or 3 months rent) is usually not sufficient.
Again, all of this is assuming that there are no 'real' troubles - no lawyers involved, no 'real' renovations needed after they move out, ... Just the cost of getting somebody to dispose of an abandoned office full of furniture costs a month rent, because second-hand office furniture isn't worth anything!
For me, I don't bother with terms of < 6 months for rentals, not even for a 100% premium (residential that is, I don't do commercial). And 1-year leases I only take as a 'probation' period, if it's clear from the beginning that they have no or little intention on staying longer, I won't accept such a candidate. Financially it just doesn't make any sense, and I'm not even counting the stress and the hassle.
What? How can that be what you take away from my post? I don't know what geographic area you know about and if 6 months to a year are anything but exceptions there, but my whole point was that short term (< 1 year) rentals don't make financial sense, unless you put a big premium on it. The premium would be 100% or so (as I said, for others, who can be bothered, which I can't), whereas the discount for >5 years is 0, or 5% at best.
Nobody trashed any of my properties, and the disputes I had were settled in my favor by the courts. I'm a lawyer, I can take care of myself. My point wasn't about me - it was about illustrating that short term rentals don't make financial sense at the rates people expect, and that most prospective tenants don't see that. Everybody thinks that real estate is easy money, but it's very competitive, the margins are slim and one decision on who to rent to can make or break your ROI for that year.
Completely agree. At the end of the day markets depend upon supply and demand forces. The economic landscape looks much different to what it did 10 years ago. Smaller companies that need contract flexibility are springing up everywhere, and the demand for flexible space is increasing. There's only so long this can be ignored by those operating or owning commercial space.
Absolutely agree. There are still plenty of companies out there who have the relevant covenants and ability to sign that 3 year lease.
However, as the economy evolves and high growth companies companies become the norm the number of people willing to commit to a 3 year lease will start diminishing. This not just because they are not able to forecast their financials, but they are not able to forecast their staff numbers either.
It's an interesting time for commercial property and it'll be intriguing to see how this plays out.
It's not just the 50$ or whatever to put up one online ad. You need to advertise on several websites plus offline. You need to show around various candidates, and do background checks on the serious ones. You have to transfer utilities, deal with mail, and other assorted tasks when somebody moves in. All of this for (in terms of yield) slim margins. And assuming that nothing is damaged or needs fixing up after somebody moves out.
Now, for commercial space it gets worse. When they go out of business, it's highly unlikely that you will recover the owed rent - likely several (2-3) months. Commercial real estate is vacant for longer, and having a tenant 'in between' basically 'resets' the cycle of getting a new tenant. (businesses take a few weeks to months before deciding, residential is usually faster, i.e. faster turnover)
Also, businesses usually make changes when they move in, not always for the better (network rewiring, dividing space etc for offices - for storefront it's much worse still). If they go bankrupt, you as the owner are stuck with the cost of repairing. The deposit (a paltry 2 or 3 months rent) is usually not sufficient.
Again, all of this is assuming that there are no 'real' troubles - no lawyers involved, no 'real' renovations needed after they move out, ... Just the cost of getting somebody to dispose of an abandoned office full of furniture costs a month rent, because second-hand office furniture isn't worth anything!
For me, I don't bother with terms of < 6 months for rentals, not even for a 100% premium (residential that is, I don't do commercial). And 1-year leases I only take as a 'probation' period, if it's clear from the beginning that they have no or little intention on staying longer, I won't accept such a candidate. Financially it just doesn't make any sense, and I'm not even counting the stress and the hassle.