by Phill Tomlinson | Apr 30, 2020 | Blog
How to understand Triple Net and Commercial Real Estate Language. As a commercial real estate broker with Commercial Properties, Inc., I get many prospects, tenants and even new brokers trying to understand Triple Net and other Commercial Real Estate terms. To help understand Triple Net, it’s important to know the definition as well as what costs are involved in a basic commercial lease. Wikipedia’s definition of Triple Net:nIn commercial real estate, a net lease requires the tenant to pay, in addition to rent, some or all of the property expenses which normally would be paid by the property owner (known as the “landlord” or “lessor”).n
Costs associated with most commercial real estate leases can be broken into three areas:
n
n
- Base Rent
n
- Triple Nets
n
- Electric and Janitorial
n
nTriple net, referred to as a NNN (in a triple net lease), represents the three major net costs:nn1. property taxesnn2. property insurancenn3. common area maintenance (CAM’s) which includes water.nnWhen considering leasing commercial real estate, there three (3) ways you can go into a lease.nn1. Triple Net Leasenn2. Modified Gross Leasenn3. Full Service Lease. I describe each of these in detail below. The words “Triple Net” is used commonly when dealing with commercial real estate because no matter which vehicle is used to take a lease, the landlord has the Triple Net’s to deal with. They are getting paid regardless how you, the tenant, feel about it. Typically the Triple Net’s are a pass through cost that the landlord passes on. These costs are seldom marked up as a profit center for the landlord.n
Here is more information on Triple Net:
nA triple net lease is one in which the tenant pays all of the ongoing operating expenses. The landlord/owner charges an annual base rate plus a pass through cost of the three major nets. Other costs such as utilities, janitorial, internet, phone, etc. are not included in the lease rent. In its purest form, a NNN Lease is where the tenant manages the property/space, doing everything from paying all the operating expenses, property taxes, utilities, insurance premiums, maintenance and interior repairs.n
Here are the Three Main Lease Types:
nTriple net lease: A NNN lease requires a tenant to pay a low lease rate while also paying other costs associated with operating and maintaining the space. In fact, with a triple net lease, the landlord will also pass on utility costs that are not separately metered, as well as all costs related to common area maintenance (CAM). These so-called CAM charges include all expenses involved in maintaining common areas such as water/sewer, trash, restrooms, landscaping, parking lots, fire sprinklers, the roof or anything that all tenants share.nnModified Gross/ Modified Full Service Lease: Unlike a triple net lease, this agreement includes one, two or all three of the Nets as part of the base rent. It’s important not to assume what’s included and to ask your commercial broker what part of the nets have been included or modified. Typically a modified gross lease will include all the nets in the base rent.nnFull Service Lease: This agreement is where the base rent covers all costs of taxes, insurance, maintenance along with the utilities and janitorial. The tenant pays a pre-determined lease rate each month and there are no pass-through expenses for operating expenses. A pure full service lease is the best of all worlds for a tenant, particularly for a medical office tenant. The tenant only has to write one check per month, and the amount only goes up incrementally over time with the normal progression of rent. Monthly rent typically rises about 3% to 4% per year (although that’s negotiable). The tenant doesn’t have to worry about getting hit later for extra costs such as utilities, and the landlord handles all of the maintenance so the tenant can focus on growing their business.n
Benefits of a Triple Net NNN Leases
nThe nice thing about a triple net lease is the potential savings you could have in the event the costs for the insurance, taxes, or CAM charges were to come down. In this case those savings are passed on to the tenant. Likewise, the downside of a triple net lease is that if expenses go up, those expenses as well are passed on to the tenant as a higher net cost.nn
nnEven after outlining all the information above, investing in CRE can still seem daunting. That’s why the Leveraged CRE Investment Team at Commercial Properties, Inc. is here to help you achieve your investment goals. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.nn nnNeed help on how to get started investing in commercial real estate? We got you covered! We prepared a free e-book that will serve as your guide to achieve your long-term business goals or obtain that property you’ve always been dreaming of!n
nn nnPhill Tomlinson is a commercial real estate broker with Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, and owner of the Leveraged CRE Investment Team specializing in investment sales and tenant/landlord representation in the Phoenix and Scottsdale submarkets. Phill applies over 21 years of experience in the Real Estate industry helping investors and owners maximize their returns. nn nnBookmark www.leveragedcre.com to learn more about the Commercial Real Estate market and keep informed of relevant real estate strategies designed to maximize your income property investment results. Connect and follow Phill on Social Media at sm.leveragedcre.com/smplatform. #LeveragedCREnn
by Prince Licaylicay | Apr 30, 2020 | All Articles, Investing
How to understand Triple Net and Commercial Real Estate Language. As a commercial real estate broker with Commercial Properties, Inc., I get many prospects, tenants and even new brokers trying to understand Triple Net and other Commercial Real Estate terms. To help understand Triple Net, it’s important to know the definition as well as what costs are involved in a basic commercial lease. Wikipedia’s definition of Triple Net:
In commercial real estate, a net lease requires the tenant to pay, in addition to rent, some or all of the property expenses which normally would be paid by the property owner (known as the “landlord” or “lessor”).
Costs associated with most commercial real estate leases can be broken into three areas:
- Base Rent
- Triple Nets
- Electric and Janitorial
Triple net, referred to as a NNN (in a triple net lease), represents the three major net costs:
1. property taxes
2. property insurance
3. common area maintenance (CAM’s) which includes water.
When considering leasing commercial real estate, there three (3) ways you can go into a lease.
1. Triple Net Lease
2. Modified Gross Lease
3. Full Service Lease. I describe each of these in detail below. The words “Triple Net” is used commonly when dealing with commercial real estate because no matter which vehicle is used to take a lease, the landlord has the Triple Net’s to deal with. They are getting paid regardless how you, the tenant, feel about it. Typically the Triple Net’s are a pass through cost that the landlord passes on. These costs are seldom marked up as a profit center for the landlord.
Here is more information on Triple Net:
A triple net lease is one in which the tenant pays all of the ongoing operating expenses. The landlord/owner charges an annual base rate plus a pass through cost of the three major nets. Other costs such as utilities, janitorial, internet, phone, etc. are not included in the lease rent. In its purest form, a NNN Lease is where the tenant manages the property/space, doing everything from paying all the operating expenses, property taxes, utilities, insurance premiums, maintenance and interior repairs.
Here are the Three Main Lease Types:
Triple net lease: A NNN lease requires a tenant to pay a low lease rate while also paying other costs associated with operating and maintaining the space. In fact, with a triple net lease, the landlord will also pass on utility costs that are not separately metered, as well as all costs related to common area maintenance (CAM). These so-called CAM charges include all expenses involved in maintaining common areas such as water/sewer, trash, restrooms, landscaping, parking lots, fire sprinklers, the roof or anything that all tenants share.
Modified Gross/ Modified Full Service Lease: Unlike a triple net lease, this agreement includes one, two or all three of the Nets as part of the base rent. It’s important not to assume what’s included and to ask your commercial broker what part of the nets have been included or modified. Typically a modified gross lease will include all the nets in the base rent.
Full Service Lease: This agreement is where the base rent covers all costs of taxes, insurance, maintenance along with the utilities and janitorial. The tenant pays a pre-determined lease rate each month and there are no pass-through expenses for operating expenses. A pure full service lease is the best of all worlds for a tenant, particularly for a medical office tenant. The tenant only has to write one check per month, and the amount only goes up incrementally over time with the normal progression of rent. Monthly rent typically rises about 3% to 4% per year (although that’s negotiable). The tenant doesn’t have to worry about getting hit later for extra costs such as utilities, and the landlord handles all of the maintenance so the tenant can focus on growing their business.
Benefits of a Triple Net NNN Leases
The nice thing about a triple net lease is the potential savings you could have in the event the costs for the insurance, taxes, or CAM charges were to come down. In this case those savings are passed on to the tenant. Likewise, the downside of a triple net lease is that if expenses go up, those expenses as well are passed on to the tenant as a higher net cost.
Even after outlining all the information above, investing in CRE can still seem daunting. That’s why the Leveraged CRE Investment Team at Commercial Properties, Inc. is here to help you achieve your investment goals. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.
Need help on how to get started investing in commercial real estate? We got you covered! We prepared a free e-book that will serve as your guide to achieve your long-term business goals or obtain that property you’ve always been dreaming of!
Phill Tomlinson is a commercial real estate broker with Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, and owner of the Leveraged CRE Investment Team specializing in investment sales and tenant/landlord representation in the Phoenix and Scottsdale submarkets. Phill applies over 21 years of experience in the Real Estate industry helping investors and owners maximize their returns.
Bookmark www.leveragedcre.com to learn more about the Commercial Real Estate market and keep informed of relevant real estate strategies designed to maximize your income property investment results. Connect and follow Phill on Social Media at sm.leveragedcre.com/smplatform. #LeveragedCRE
by Phill Tomlinson | Apr 23, 2020 | Blog
Lease vs Purchase, it’s a decision most business owners are faced with, and one hat isn’t easy. With rents going up and interest rates continuing to post rates that are at or near historic lows, the balance might seem to have shifted to the latter option in the lease vs. purchase decision. However, leasing remains a strong option for many companies.n
Reasons to Purchase vs Lease
nThe purchase side of the lease vs purchase equation usually comes into play when your company’s needs are fixed and predictable for the long term. If you know what you need now and it won’t change for at least a decade or two, purchasing can be a good option. It gives you total control over your space and a great deal of certainty over what you can do with it since, after all, you own the space.nnPurchasing also gives you a chance to participate in the potential appreciation of the property. For many businesses and most locations, the downsides of purchasing and of tying up capital are more than the benefits that come from the appreciation. However, if your business is one where appreciated property can form an exit strategy or if you are in a position to control highly valuable property, purchasing may be a wiser option.n
The Benefits of Lease vs Purchase
nMany of American’s most successful companies come down on the leasing side of the purchase vs. lease decision for a multitude of reasons. Leasing is typically more flexible, less capital intensive and offers more options.nnThe flexibility benefits of leasing are very simple. While it’s technically true that buildings can be sold on the market, the usual case is that finding a buyer for a vacant building — especially at a good price — can take months or years. With a lease, though, you can move out whenever your lease expires. If a building needs work, you can leave that work for the landlord as well.If you have your lease written with extension options, you can choose to automatically renew it, taking flexibility away from your landlord.nnLeasing helps to conserve capital in three ways. First, moving into a leased property usually requires a lower initial investment than purchasing a building, simply because rent and security deposits are usually less than loan costs and down payments. Second, lease payments may be cheaper than mortgage payments. Third, while the accounting of leases is shifting, leases are still treated differently than building purchases when it comes to principles of building your business’s balance sheet.nn
nnEven after outlining all the information above, investing in CRE can still seem daunting. That’s why the Leveraged CRE Investment Team at Commercial Properties, Inc. is here to help you achieve your investment goals. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.nn nnNeed help on how to get started investing in commercial real estate? We got you covered! We prepared a free e-book that will serve as your guide to achieve your long-term business goals or obtain that property you’ve always been dreaming of!nnn nnPhill Tomlinson is a commercial real estate broker with Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, and owner of the Leveraged CRE Investment Team specializing in investment sales and tenant/landlord representation in the Phoenix and Scottsdale submarkets. Phill applies over 21 years of experience in the Real Estate industry helping investors and owners maximize their returns. nn nnBookmark www.leveragedcre.com to learn more about the Commercial Real Estate market and keep informed of relevant real estate strategies designed to maximize your income property investment results. Connect and follow Phill on Social Media at sm.leveragedcre.com/smplatform. #LeveragedCREnn
by Prince Licaylicay | Apr 23, 2020 | All Articles, Buying
Lease vs Purchase, it’s a decision most business owners are faced with, and one hat isn’t easy. With rents going up and interest rates continuing to post rates that are at or near historic lows, the balance might seem to have shifted to the latter option in the lease vs. purchase decision. However, leasing remains a strong option for many companies.
Reasons to Purchase vs Lease
The purchase side of the lease vs purchase equation usually comes into play when your company’s needs are fixed and predictable for the long term. If you know what you need now and it won’t change for at least a decade or two, purchasing can be a good option. It gives you total control over your space and a great deal of certainty over what you can do with it since, after all, you own the space.
Purchasing also gives you a chance to participate in the potential appreciation of the property. For many businesses and most locations, the downsides of purchasing and of tying up capital are more than the benefits that come from the appreciation. However, if your business is one where appreciated property can form an exit strategy or if you are in a position to control highly valuable property, purchasing may be a wiser option.
The Benefits of Lease vs Purchase
Many of American’s most successful companies come down on the leasing side of the purchase vs. lease decision for a multitude of reasons. Leasing is typically more flexible, less capital intensive and offers more options.
The flexibility benefits of leasing are very simple. While it’s technically true that buildings can be sold on the market, the usual case is that finding a buyer for a vacant building — especially at a good price — can take months or years. With a lease, though, you can move out whenever your lease expires. If a building needs work, you can leave that work for the landlord as well.If you have your lease written with extension options, you can choose to automatically renew it, taking flexibility away from your landlord.
Leasing helps to conserve capital in three ways. First, moving into a leased property usually requires a lower initial investment than purchasing a building, simply because rent and security deposits are usually less than loan costs and down payments. Second, lease payments may be cheaper than mortgage payments. Third, while the accounting of leases is shifting, leases are still treated differently than building purchases when it comes to principles of building your business’s balance sheet.
Even after outlining all the information above, investing in CRE can still seem daunting. That’s why the Leveraged CRE Investment Team at Commercial Properties, Inc. is here to help you achieve your investment goals. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.
Need help on how to get started investing in commercial real estate? We got you covered! We prepared a free e-book that will serve as your guide to achieve your long-term business goals or obtain that property you’ve always been dreaming of!
Phill Tomlinson is a commercial real estate broker with Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, and owner of the Leveraged CRE Investment Team specializing in investment sales and tenant/landlord representation in the Phoenix and Scottsdale submarkets. Phill applies over 21 years of experience in the Real Estate industry helping investors and owners maximize their returns.
Bookmark www.leveragedcre.com to learn more about the Commercial Real Estate market and keep informed of relevant real estate strategies designed to maximize your income property investment results. Connect and follow Phill on Social Media at sm.leveragedcre.com/smplatform. #LeveragedCRE
by Phill Tomlinson | Apr 22, 2020 | Blog
Here are some tips on finding the right contractor for your project from our friends at Belmontez Construction. Always, always, always work with a licensed & insured General Contractor. Having a licensed contractor benefits both the client & the General Contractor. A licensed contractor offers liability insurance to protect the client & the project. Now don’t get us wrong, just because a contractor has a license & insurance does not necessarily mean they are the right fit for you.nnYou need to TRUST your contractor and have open communication to ensure all your questions are being answered to your expectations. Don’t forget about the office staff also. The office staff are also key players & work behind the scenes to ensure the project runs smoothly, varying from the coordinating of the project, proper accounting & supervision.n
What to Ask When Finding the Right Contractor for Your Project
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- State license number… verify the license is active & in good standing with no outstanding or open claims
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- Ask how long in business
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- A Certificate of Insurance
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- List of references
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- Guarantee of work
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nThose are some key items to keep you safe!nnDownload Our Brochure Here (PDF)n
For most construction projects City permits are required
nWhy you ask? Permits are in place to protect the client and ensure all workmanship is done in accordance to building codes. With all that being said, Belmontez Construction is here to help you with your next business venture! Give us a call and Remember, The Road To Success Is Always Under Construction!nnBelmontez Constructionn9299 W Olive Ave #505, Peoria AZ 85345nWebsite: www.belmontez.netnOffice: 623.466.9596nnOwner: Agustin Belmontezn623.330.3323 | a@belmontez.netnnSales: Jim Zapienn623.230.9189 | field@belmontez.netnn
nnEven after outlining all the information above, investing in CRE can still seem daunting. That’s why the Leveraged CRE Investment Team at Commercial Properties, Inc. is here to help you achieve your investment goals. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.nn nnNeed help on how to get started investing in commercial real estate? We got you covered! We prepared a free e-book that will serve as your guide to achieve your long-term business goals or obtain that property you’ve always been dreaming of!nnn nnPhill Tomlinson is a commercial real estate broker with Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, and owner of the Leveraged CRE Investment Team specializing in investment sales and tenant/landlord representation in the Phoenix and Scottsdale submarkets. Phill applies over 21 years of experience in the Real Estate industry helping investors and owners maximize their returns. nn nnBookmark www.leveragedcre.com to learn more about the Commercial Real Estate market and keep informed of relevant real estate strategies designed to maximize your income property investment results. Connect and follow Phill on Social Media at sm.leveragedcre.com/smplatform. #LeveragedCREnn
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