Understanding Net Leases and How They Affect Investments.
Real estate industry in one country is not similar to another due the different policies enacted by the authority bodies. A net lease is a lease in real estate where the tenant covers the rent as well as all or some part of cost associated with maintenance, usage or operation of the property. Some of the usual costs could involve the taxes that are associated with the property, janitorial costs, property management costs and also trash collection in some cases.
Taxes, insurance and maintenance are the three main categories that the net lease cost are put into apart from the rent. There are different kinds of leases and if you are looking to invest in a market that has active net leases, it would be wise to understand the different leases. The first category is the single net lease where the tenant is required to pay the taxes that are associated with the property apart from the rent. With a double net lease the tenant is supposed to pay the rent, insurance premiums and the taxes on the property as well.
NNN or the net-net-net lease is the third type of net lease and with this one you are required to pay the rent and cover all the expenses that come with the property , this favors the landlord. With a single net lease the tent has very little risk passed on to them as they are only covering the taxes, these net leases are least common in the market. As much as the tenant is only paying the taxes in the single net lease, some landlord will ask the payment to go through them so that they can keep track of the taxes and certify that none has been missed.
As an investor you need to be aware that the net leases almost always favor the landlord. It is possible to negotiate them and one should consider doing so . The the main reason to consider negotiating the leases is because you will have to pay them regardless of your business doing well or suffering loses.
Ideally the rent before the percentage of the usual cost should be less than it would be if you were to in a standard lease agreement. Everything falls on the research that the investor carries out, in consideration to that of the business, the details in the net lease need to be well evaluated before taking them click here. If the net lease does not work for you and your business you could consider gross lease where you pay an agreed amount of money on a monthly basis.