Whether you have experience in residential property and are looking for a new challenge or you are starting your investment journey in commercial real estate, the journey is exciting. You are using your money to invest in your future and that of your family. You will learn a lot during the investment process, but if you seek to pursue commercial real estate investing, you need to know about commercial rent.

Why You Want Commercial Tenants

Although commercial property investment is a bit more complicated than residential investment, one of its benefits is its tenants. Yes, commercial leases are more detailed, but your tenants are typically business-focused. They also have experience leasing properties and work with professionals in the industry, from real estate agents to attorneys, regularly.

These tenants tend to be long-term because no one wants to change locations when their business is doing well. In addition, they maintain and upgrade your property for you. They ensure that the building and land are in good shape because these factors are a direct reflection of their business, not yours.

Rental Calculations

You can charge several different types of rent. For example, you may create a percentage lease. In this situation, your tenant pays a percentage of the gross income the property makes. For example, if you are leasing to a retail store that makes $50,000 per month in gross income, you may charge a base rate of 5% per month, giving you an income of $2,500 per month on the property.

If you have a minimum amount you need to make on the property, you can create your lease as a percentage over base rental. This means that your tenant is charged a minimum amount, say $1,000, per month. Then, if the income from the property reaches over a set amount, say $50,000, you will also receive a percentage of all the sales over this amount. Therefore, if your renter makes $90,000 one month, your rent would be your base amount of $1,000 plus a percentage of the income between $50,000 and $90,000 (or a percentage of $40,000).

You may also charge your tenant a lower base rent and a percentage of their gross receipts. The percentage is typically less because you are receiving money from every receipt, not just those over a set amount.

Finally, you can charge rent per square foot of property on an annual or monthly basis. For example, if your building is 3,000 square feet and you charge $10 per square foot, you would earn $30,000 per year. If you divide this out into months, you would make $2,500 per month.

As you pursue your commercial real estate investing strategy, you will gain a better understanding of the market rental rates for different properties. However, these are options you can offer your tenants.