Coming out of COVID lockdowns many companies are finding they will be downsizing their offices. These decisions are being made to allow many of their staff to continue working remotely. The result is a growing amount of space available for sublet, often at a substantial discount.
These sublets can actually create a unique opportunity for a residential investor to experience commercial property management with limited downside risk, given the “bite size” of the investment as well as the fact the investor can simply choose not to renew at the end of the term with no penalty.
How It Works
A sublet typically carries remaining terms from 3 to up to 8 years.
At $25.00 a sq ft, a 4,000 sq ft space will cost the investor $400,000 for the lease assuming a remaining term of 4 years. However, if the investor can take over the space at a discount from the original tenant at say $20.00 sq ft (a 20% sublet discount), the investor stands to realize a gross return of up to $60,000 on the property. This presumes the investor is able to re-let the space at the original $25.00 price, based on the additional effort the investor puts in to find a new tenant.
The investor may be able to further enhance their profits if they take on the responsibility to complete any redesign and/or refurbishment the space may require.
Subject to the investor’s own financial position financing for a transaction like this can range anywhere from self funding to 100% financing, with numerous potential options in between.
What It Delivers to the Investor
This subletting program is a unique market opportunity coming out of the COVID upheaval. The program can deliver numerous benefits to the investor including:
- Controlled entry into commercial property investments,
- Flexible financing options
- Easy access to professional property support, if desired
- Dependable monthly cashflow