Understanding Net Leases and How They Affect Investments.
Depending on where you live and the polices affecting the area that you are in real estate could entail a lot of things. 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.
The costs are broken down into three categories which are maintenance, insurance, and taxes. 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.
The final category commonly known as the triple net lease or net-net-net lease requires you as the tenet top pay the rent plus all the costs associated with the property. 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 paying taxes alone some landlords prefer to having the payment go through them as that way they get to know that the payments have been done on time and that they are up to date.
As an investor you need to be aware that the net leases almost always favor the landlord. Negotiating the net leases is possible and as the investor you just need to understand the process and the tips on how to go about it. 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. The investor needs to do well-informed research on all the details that are in a net lease in consideration with all other aspects of the business to have a complete picture of whether the whole thing is a worthy undertaking. 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.