If you need top-quality tenants for your commercial property in Houston, TX, tenant screening is a must. According to the most recent census, Houston's population has grown by an impressive 16 percent over the last decade.
Before you implement tenant interviews and other checks, it's important to know what the best practices are.
Read on to discover how to conduct commercial tenant screenings the right way, so you can improve your process today.
Explore Their Financials
Part of any commercial lease screening should include a deep dive into the company's financials. Examine your prospective tenant's stability and financial health by asking for credit reports and financial statements.
Just like a landlord would run a credit check on a residential tenant, a financial credit and health check on a commercial check is vital to good tenant screening. This will help you determine whether the new tenant is financially stable and strong.
In some cases, you can also ask the tenant for a copy of their business plan. These plans demonstrate how the business is making a profit and will give you more insight into its history and reputation. Now is also the time to confirm that the company is in line with current laws and regulations.
Tenant Screening: Reference Checks
A reference check for a commercial tenant is a bit different from an individual. You'll need to get information about the tenant's past rental history and speak to some fellow business colleagues or even their suppliers. Individual tenant background checks might be needed if the business is a sole proprietorship or a smaller business.
These checks are vital to ensure that your potential new tenant is trustworthy and reliable. It also gives you a clearer picture of their past including rental payment history and more. A simple phone call will do, or you can ask for a signed reference letter for their file.
Perform Continuous Screening
A key part of proactive commercial property management is ensuring your tenant remains reliable. This includes doing continuous tenant screening of their financials each year, preferably before they renew the lease.
Ongoing screening gives you an inside view of your tenant's most up-to-date financial status. If it appears that the tenant's business is struggling or becoming high-risk, you have the option not to renew the lease.
This type of screening is crucial if you want to protect your investment. It helps you keep risks at a minimum while keeping your returns at a maximum for the long term. In most cases, your commercial tenant should have no issues paying on time, which means you're reaping the rewards of residual income on your property.
Use Screenings to Protect Your Investment
Keep these best practices for tenant screening in mind for your next commercial property lease. With the right plan in place and some diligence, you'll have no issues finding quality tenants.
PMI Northwest Houston has years of experience dealing with commercial properties in the Houston area. Contact us today to learn more about our top-notch property management services.
