| Location |
Always a very signigicant consideration. Several other important features should be considered including Average household income, surrounding commercial and residential uses and projected population growth. |
| Type of Lease |
An absolute net lease or NNN lease is one where the tenant is responsible for all expenses associated with a property. There are some instances where the landlord will forward insurance and property tax bills for payment while others are handled directly by the tenant. A double net or NN lease is one which the Landlord is responsible for the repairs and maintenance of the roof and structural components of the building. Some tenants will only write a NN lease. The vast majority of day to day management is still handled by the tenant. The landlord will be notified if there are issues with the roof. Typically, a landlord will have a reserve account in the event repairs are needed. |
| Credit of Tenant |
Rent will be guaranteed by the tenant signing the Lease. The tenant may be a public company or a private company. There are some very successful private companies. Some leases are signed by corporations while others by franchise operators. Some franchisees are quite significant. |
| Rent Increases |
Leases will either be flat or contain rent escalations which may occur annually or every 3-5 years. Certain credit tenants only write flat leases. Investors need to look at these properties as a bond. Property leases for these higher credit tenants usually attract lower fixed rate debt. |
| Leverage |
Depending on your 1031 exchange requirement, you may chose to purchase a property for cash or with new or assumable debt. Remember that cap rates are only useful when comparing all cash transactions. Most of the property we sell qualifies for long term fixed rate debt. |
