Sell for More Trivia is a weekly blog series that playfully presents a trivia question about commercial real estate.
Rollover Risk refers to the risk associated with leases rolling over. The risk lies with the fact that the tenant has the option to vacate. If they do so, the landlord not only loses the monthly revenue but they also have new expenses like tenant improvement buildouts and brokerage commissions.
Example
Let’s consider a commercial property with month-to-month leases.
This is not a concern for apartment renters. However, month-to-month tenancy for most other property types…or even tenants having a year or two remaining before their lease expires…is problematic for many lenders.
Simply put, lenders will not accept rollover risk. One way to mitigate this risk is to identify when each tenant originally moved in. If they’ve been a tenant at the property for several years then it’s much less likely that they plan to move once the lease expires.
But the best thing to do before you sell or refinance your property is to get as many tenants re-leased for as long as possible. Once you’ve minimized the rollover risk…then seek financing or a sale.
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About Beau Beach, MBA CCIM
Beau is a tenacious Commercial Real Estate Broker, author and adoring father of four. His clients appreciate his no-nonsense demeanor and his legendary work ethic.
Beau leads Beachwood which is a commercial real estate broker for sellers in the Nashville, Milwaukee and South Florida markets.
He’s the author of the books The 3 Reasons: Why Most Commercial Properties Don’t Sell and True Wealth: What Every Seller Should Know About 1031 Exchanges.
Beau can be reached at 800-721-3287, click to schedule a call or Beau@soldbybeachwood.com