Tenants today are typically looking for premises that they need for their business.  In some cases those tenants do not understand the lease market rents and stock levels, and they ask look at properties that they cannot afford.

Have you come across that problem before?  It’s frustrating when you may spend too much time with these tenants, only to find that they cannot make a decision.  I like to get straight to the point with some direct questions with tenants and their leasing requirements.  My basic rule is to work with the tenants that can make a decision and that know what lease value is all about.

Market Information that is Up to Date

What you need to know really quickly in any tenant qualification process is if the tenant really understands what the property market conditions are today and how things are leasing in the segment or the location.  Do they know all about the typical lease deals of today and alternatives available in any lease?  It’s a good idea to probe into all of that before you go into too much detail about existing listings and available vacancies.

Facts and Questions about Leasing

Here some of the initial important facts to review and get tenant enquiries sorted and qualified.  These concepts are from my larger checklist of topics and questions to use with tenants:

  1. What do they want? – Understand the property type, location, size, and improvements. From those facts you can usually understand if such a property actually ‘exists’.  From that initial discussion you can move to the next level of questioning.
  2. Have they looked at other properties with other agents? – Information from other properties and agents locally can confuse your negotiation chances. Question the tenant to see if they have inspected other local properties and when.  If that is the case then review their expectations about improvements, rents, and outcome.  Do they really know the realities of supply and demand for space currently?
  3. Property use intended – What will they use the property for? Make sure that the use complies with current occupancy codes for the area and property, and that the landlord is comfortable with the intended use.  When in doubt get them to talk to the local council.  Property use approvals may be required for special property uses.  The approvals process can take a long time and divert your efforts to find a better tenant.  Don’t let the landlord for the property get tied to a lease agreement that is subject to a material change of use that can be months away.
  4. What can they afford? – Whilst there is normally a rent target for a landlord, there are also sundry charges that attach to occupancy such as outgoings and consumables such as electricity. Everything adds up and ultimately the tenant has to pay for those things as part of property occupation.  Can they afford all of the occupancy costs?  Don’t fall for the ‘trick’ of granting the tenant a lengthy rent free period only to later find that they cannot afford the ultimate rent that they need to pay.  Ask all the right questions before you negotiate a lease offer and occupancy agreement.

From these four simple concepts you can decide if the tenant is worth working with and showing properties to.  If they satisfy all of your questions then move to the next level and show them some properties.