Industrial Property Mistakes

One of the reasons Industrial property is favoured by  private property investors, is that  it is relatively simple to manage. Once the property has been tenanted, (leases average  3 to 5 years). The lease is filed away and as long as the rental is paid, it is left in the file for the duration of the lease.

The most common mistake most of the industrial property owners make is not recovering expenses in terms of the lease. A typical gross lease allows for the recovering of rates increases over and above the rates at the lease commencement. Often the rates increase is a small amount and the landlord does not want to be petty in recovering it. The problem with this, is that  this makes it difficult to recover increases later in the lease and whilst it may only be a small increase in the first year this amount will become greater as the lease progresses. Trying to recover “back payments” does not bode well for good relationships with tenants. Another expense that landlord’s often neglect to recover is water usage. Ideally electricity and water should be seperately metered. Prepaid electricity meters are a good idea but are not always possible or practical  for large power users.

It is good practice to do maintenance inspections at lease once a year. Typical gross  industrial property leases  allow for the tenant to maintain the interior and the landlord, the exterior. Often the landlord does not inspect the property for the duration of the lease and has difficulty in getting the tenant to reinstate the premises at the end of the lease.

When a leases is signed, it is good practice to record all important  dates (such as mid year  for annual rates increase recoveries) , property inspection dates and  dates for lease renewals. When recovering rates increases, it is good practice to send the tenant an email or letter explaining the increase.

Industrial properties are simple to owner manage and  property managers will charge you anything between two and five percent to manage your property. With a simple system in place, you can make significant savings over the life of your property.

With a disciplined approach to managing your asset, industrial property can be a relatively hassle free investment. If you have had a good tenant with good housekeeping practices, often all that is needed when replacing tenants is to clean the carpets and give the warehouse or factory, a coat of paint.