Real Estate Blog

Are you new to real estate business? If you are intending to invest in commercial real estate, you should get to know about the facts that are essential to make your business venture a success. Satisfactory location, rent and neighborhood are some of the things that always remain on the top, if you are looking for the success in commercial real estate business. You must have good negotiation skills so that you can negotiate the lease to terms that would allow you to start up your business with necessary opening. It also ensures long term profitability. Negotiation does not mean that you should dominate the landlord. It won’t do any good for you. Therefore, you must find a mutual decision on your lease that will be beneficial for you as well as landlord. If you don’t do lease on good terms, tenants will refrain from your property which means loosing on your business.

Since you are starting up with the business, you should know basic terminologies that are there in the real estate lease. If you are not sure about how to go about a lease while investing in commercial real estate in California, you should get in touch with reputed California Property Management Company. But still you should know about basic constituents of a commercial property lease. Any commercial property which is up for lease will have standard lease form agreement which will be prepared by the landlord. Structure will remain same but you will come across difference in terms and language from landlord to landlord and from property to property.

You will get this standard lease form agreement after your agent sends RFP (request for proposal) to the landlord. RFP will have several important issues however it must have section outlining the expectation of the tenants with respect to the Tax escalation and (CAM) common area maintenance. Base rent is the next thing that gets included in the lease. Base rent is the asking price for the space. It does not include any kind of taxes, insurance and maintenance that may be used for the build out. Common Area Maintenance (CAM) in addition to taxes and insurance known as Triple Net. It will be divided between the tenants on pro-rata basis. Now, let’s talk about the gross rent which means that total of base rent and triple that you would need to pay throughout the lease.

Vanilla box is the next terminology. It is not a dessert but every important aspect in a commercial lease. Primarily it is defined as concrete floor, drywall shell, basic commercial lighting and basic HVAC. The variation depends on the understanding of landlord about vanilla box. Build Out or tenant improvement is the amount of money which is to be taken out from vanilla box. Therefore, build out is a great bargaining tool especially while starting up a business when you don’t have big budget. Before finalizing the lease, you should know what is important.

Are you investing in commercial real estate? What type of lease do you think is going to fetch you the highest amount of profit on your investment? According to experts in the field of real estate, Net Lease is one of the best options for commercial properties. Though there are some risks in it but if you want to earn you need to have courage, patience and strategy. If you’re intending to invest in some commercial property in California, you should get in touch with some reputed California property management firm so that you can get expert guidance through the process of net lease. There are several benefits of investing in net lease.

First thing that makes net lease one of the best option is good amount of capital gains. If you hold the commercial property for a long period of time, chances are very high of getting high capital gains. Market keeps on fluctuating but a net lease commercial property guards you against the inflation. This is possible as the value of the properties increases over the time. Another thing that makes investing in net lease commercial real estate a good is its diversity. Most of the real estate experts will tell you that with investment in commercial properties you can diversify your investments and this is the best way to protect yourself against any kind of financial crisis in the future. Once you’ve invested in commercial real estate, you can further try your hands in different fields as well. In case, a particular industry is facing economic crisis, your investments in other fields will allow you earn.

Like everybody, you must be feeling it very hard to pay hefty amount in taxes in every year, isn’t it? But if you have invested in net lease commercial property, you can avail several tax benefits as well. Best part is that every year you get a chance to write off some tax amount as the depreciation of the property though its value increases every year. This is just opposite to some investments where taxes keep on increasing no matter you’re getting good profit on it or not. Apart from saving money, real estate investment would also let you maintain the cash flow. It is not tough to calculate your expenses and income as you are getting set amount of money from your commercial property. Therefore, you can manage mortgage installments, rents and other expenditures without much of difficulties.

Net lease have several other advantages as well. First of all, as a landlord you’re responsible for all of the repairs and maintenance of the property. However, if you’re a net lease with the tenants, you would be responsible for a little part of the repair and maintenance.  If you have double net lease, tenants would be responsible for building insurance and taxes but you would need to pay for all the expenses that comes in structural maintenance and in triple net lease tenants are responsible for all the expenses. There are several benefits and advantages of net lease; but thorough knowledge and expert advice is very important.

Do you own a commercial real estate? Are you listing it to sell it or to lease it out? Before putting your commercial property on a lease, you should make sure what type of lease you want to employ or deal with. The performance and your income will be based on the type of lease you’re going to use. You can choose from various different types of real estate leases however, you would need to first understand the rules and basic elements of each type and figure out which one would suit your needs in best possible way. Following are few of commercial real estate leases’ types.

Gross Lease

In gross lease, tenants need to pay rent including the expenses incurred in building operating costs. In other words, tenants will pay only rent and rest of the expenses will be bear by the landlord. Therefore, before opting for this kind of lease, you should analyze everything and your finances to make sure you would be able to maintain building operating costs. If you own an office or retail property then gross lease could be an ideal type of deal. You should look out for balance between the rent you are charging and outgoings that could occur in the future. In case, property is bit older then it’s obvious that the outgoings or the building operating costs will be higher than that of a new or recently constructed properties. Hence, before signing a gross lease you should check the condition of the building so that you can figure out how much outgoings might occur.

Net Lease

In layman’s language, in Net Lease tenant is responsible for basic rent in addition to percentage of insurance, maintenance and operating fees. However, net lease have been further divided into three categories: net lease, double net lease and triple net lease. Simple net lease, as we have already discussed tenant just need to pay some portion of expenses in addition to rent. In double net lease, tenants need to pay taxes and rates as defined in the lease however; they are also liable to pay the insurance premiums for the commercial real estate. If you’re opting for triple net lease, it will have all the characteristics of double net lease in addition to the liability of the tenants to pay costs of maintenance and repair of the property.

Ground or Land Lease

In this type of lease, tenant takes ground or vacant land on lease and builds property on it. When lease ends, all the improvements and infrastructure that have been made on the ground will become landowner’s property.

In case, you’re not sure what type of commercial property lease, you should go for; best way is to get in touch with some property management company. If you’re intending to buy property in Ohio, you should look out for reputed Ohio Property Management Company so that you can get professional advice and the experts working with the firm will assist you in nailing down the deal that would be best for you in every aspect.

Most of the business owners get their offices to operate their business on lease. There are two reasons for taking office space on lease. First of all, the most desired office locations cannot be bought, you can only get them on lease and the other reason is finance, everyone is not ready with cash to buy office space. Therefore, leasing becomes the best option. As a business owner, if you are leasing a commercial property, you’d experience an ultimate boost. Even if business owners have money and they can afford buying commercial real estate but they prefer leasing the property because they can secure the property by paying just initial amount and monthly payment rather than paying hefty amount in securing it permanently. This is the reason even big giants in the markets such as Wal-Mart, Target and Burger King leasing office space rather than buying it.

With leasing commercial real estate especially the previously built properties by someone else can prove to be very beneficial as renovations and improvements made by them might suit your business needs as well. Even if you need to make some changes, it will greatly reduce the cost of renovation as half of the work had already been done. For better deals, you can talk to the landlord regarding renovation. Landlord will make required renovations and improvements in the property and cost will be completed with increase in the amount of rent. You can get almost everything in terms of commercial real estate without paying much and this is possible only when you’re leasing the property. For better results form your commercial real estate, you should get in touch with some property management firm so that you can enhance the communication between you and your landlord. You should always go for local firm or example, if you’re looking for a commercial property in Ohio, you should look out for a reputed Ohio Property management firm.

Leasing of commercial property allows you to expand your business as well. If you buy commercial property, you’d be investing money at one place only. However, leasing allows you to open your outlets at multiple locations with same amount of investment and you can earn more revenue without increasing your expenses on commercial property. There are few     drawbacks of leasing as well. Firstly the rent you’re paying is not going to accumulate and increase your asset value. Moreover, landlord can increase the rent anytime. This could hit your financial management badly. If you don’t agree to increase in rent, your lease might not get renewed. Therefore, you would need to agree to it, if you don’t want to move from that particular location. There are several clauses in a lease that would bind your business ventures. So, before signing the lease, you should go through it thoroughly so that no hindrances occur in your business.

Commercial property leasing can bring boon for your business however, you should be very careful while accepting the terms and conditions of the lease. 

If you own a property and rented it out, you must be looking for a perfect landlord tenant-relationship. Isn’t it? But why this kind of relationship is important. First it makes easier for you to manage everything. As an investor, you never want to keep your property vacant so that you don’t need to compromise with your profits from your commercial property. Therefore, for any commercial property it is very important to pick the right lease. In case, you pick the wrong one, you will end up in a complete mess. Hence, before signing the lease, you should consider if it is going in your favor or not; do you get guaranteed rental amount from it or not. A real estate lease should be beneficial for both tenants as well as the owner.

Tenants will compare rent and the commercial property before signing the lease because no wants to pay extra money it’s not worth it. There are different lease options available that depend on the location and space of the commercial property. Incase, you property is located in the upper class commercial area; the structure of its lease would be totally different than a commercial property which is located in some middle class area. If you don’t carry a good knowledge about real estate, you should get in touch with some property management firm. For example, if you want to rent out a commercial property in Michigan, you should search for some Michigan property management firms so that you can get the best results. Since you want to lease out your property, you should know about the terms that will be there in the lease.

Standard lease form agreement is one of the most common types of leases. Standard lease is prepared by every landlord who wants to lease up his/her property. Terms and conditions will differ from one property to the other and from landlord to landlord however, you’d always find a similar structure.

Request for Proposal (RFP) is always sent by an agent to the landlord in order to get a copy of the standard lease form agreement. If you go through a RFP, you’d find numerous vital issues that will be differ from one owner to the owner. But one thing that will remain there in the proposal is section that will highlight the tenant’s expectations.

Base Rent is the basic cost that you’d need to pay in order to use the commercial property. However, it would not include any taxes, insurance or maintenance charges such as CAM (Common Area Maintenance).

Triple Net includes CAM, insurance and maintenance which will be divided between the tenants that are there in the commercial real estate. If you add up Base rent to the triple Net, it is known as Gross Rent.

Consumer Price Index or CPI is used by the government to determine the value of the lease that has been increased on yearly basis. These were few terms that would be there in almost every lease.