Commercial properties, also known as commercial real estate (CRE) or income properties, are buildings used by businesses or land that is intended to generate income, either through rental income or capital appreciation. When dealing with such properties, understanding down payments for leases can be crucial.
This group encompasses a diverse range of properties, including malls, hotels, shopping centers, multifamily housing, farms, garages, warehouses, office buildings, medical centers, and industrial spaces. It includes even bigger apartment buildings for rent.
Luckily, there are several down payment options for commercial real estate leases. Making a cash security deposit on a commercial real estate property can result in a substantial amount of money. With the cost of nearly everything on the rise, the business could use this capital to better its chances of success.
Using the capital for hiring expenses, equipment purchases, and so on would benefit them more. But as the landlord, you still need to protect yourself. Additionally, a large down payment could be the deciding factor between signing the lease and not. Having other options, like the ones Otso provides, is ideal for both landlords and tenants.
Let’s explore some options for tenants and landlords when using STRATAFOLIO to manage their commercial properties.
Convenience with STRATAFOLIO
STRATAFOLIO makes it easy, quick, and safe to handle your rent and service charge payments. STRATAFOLIO has the best security features in the business because ACH Payments, a world leader in online payments, powers it. This keeps your personal and financial information safe.
Find out how STRATAFOLIO’s property management software helps you manage maintenance requests, rent payments, tenant communication, and much more.
Security Deposits
A security deposit is a tenant’s payment to a landlord before the lease begins and the keys are handed over. The landlord holds this payment as security against unknowns that may occur during the lease term, rather than applying it towards rent.
Typically, landlords hold security deposits until the tenant vacates the premises. Landlords usually use them to cover the cost of damages incurred during the tenancy. For as long as we can remember, people have considered them “normal” in business. But nowadays, there are other options.
Letters of Credit
Letters of credit are letters from the tenant’s bank that say two things. The deposited funds are reserved and available for use. If the tenant defaults on the lease, the landlord can collect the money. While these are loved by landlords, they are not ideal for tenants due to the additional fees. Tenants typically have to pay the bank a fee to keep that money in reserve and not lend it to others. This results in letters of credit being a costly alternative to a security deposit.
Surety Bonds
Surety bonds are legally binding contracts that ensure obligations are met or, in the case of failure, that the entity requiring the bond will be paid. They exist between the principal, surety, and the obligee, and are great for residential and multifamily estate assets, but not commercial. In commercial real estate, they’re too expensive and are not flexible enough to meet the requirements of the lease terms. So what are we left with? What else is there to do that benefits both the landlord and the tenant? Enter, Otso.
Otso
Otso is the solution that provides an option for landlords to replace cash deposits in their commercial leases so that the businesses can put the hard-earned capital to better use. With Otso, landlords get the security of AA-rated coverage and up to $50,000 in lease performance guaranteed for a small fee beginning at $250/month. The landlord covers the cost, but because the monthly fees for Otso are so small, they typically negotiate them into the rent itself. Tenants love it because it no longer requires a cash deposit, and they keep the capital, and landlords love it because they get 3-5 times the coverage of a security deposit. Everybody wins.
STRATAFOLIO Co-Founder and CEO Jeri Frank sat down with Otso Co-Founder and President Marissa Limsiaco in a LinkedIn Live event, Creative Ways to Manage With Less Risk and Happier Tenants. You can watch the YouTube video here to learn even more about Otso.
In the modern world of commercial real estate, there are traditional methods, but there are also more modern solutions. Contact Otso today to learn more about their turnkey solutions for securing a lease.
Easy Payments with STRATAFOLIO
Keeping all of your properties in great shape and having a steady stream of happy renters is the most reliable way to grow your real estate business. Property management software that is flexible and easy to use can save you time, money, and help your business grow in 2025, whether you are an owner or investor, managing your own buildings or those of others.
Schedule a demo with STRATAFOLIO today to streamline your payments!
