News For This Month: Investments

What Is A Leased Investment? Investment grade, long term net leases means the primary aspect of a certain lease structure. Investment grade means the quality of tenant to which the lease is made. Long term on the other hand indicates the general length of lease and the net leases refers to structure of these lease obligations. I recommend you to read the next lines if you wish to learn more about these subjects. Number 1. Investment Grade – this lease is basically lease to tenants that are maintaining a credit rating of Better Business Bureau or even higher. The rating investment is being represented by the company’s ability to repay its obligations. BBB is actually representing only good credit rating in line with the agency’s rating. Only bigger and national companies have the ability to maintain good credit rating most of the time.
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Rating agencies are not monitoring thoroughly franchise and regional tenants. For this, it is important that the lease is corporate backed by parent company and isn’t just regional franchisee. There is a big difference between strength and credit of regional franchise owner as well as the actual corporation itself. It is the corporate parent that generally provide a better rent stability even in economic downturn while the rent stability is similar to having improved stability for the price and value of your real estate.
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Number 2. Long Term – long term most of the time means having fixed length obligation in lease term or beyond ten years. There are some advisors or brokers that might include lease option as part of fixed lease term. It is vital to distinguish between obligations and options. If for example the tenant is offered an option to renew for additional 5 years after the initial 5 year term, the lease term ought to be considered as 5 year lease with additional 5 years in option and not a 10 year lease. As being a client, it is your job to learn about the rent terms and on how long the tenant is obligated to pay as it can make a big difference as soon as you start considering returns, risks, ability to acquire financing and also your ability to resell property for profits. Number 3. Net Leases – there are two types of leases wherein it’s the tenants who are responsible for operating expenses which include the structure, insurance and the roof and these are Double Net or NN and Triple Net or NNN leases. in relation to pure NNN lease which covers such costs via term of lease, it is otherwise called as absolute NNN lease. Some even call it as Triple Net that don’t include expense on roof or structure of the building. As a matter of fact, these leases are also known as modified NNN or double net NN leases.