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What Is A Leased Investment? The primary aspect of certain lease structure is investment grade, long term net leases. On the other hand, long term indicates the general length of lease as well as net leases which 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 – as a matter of fact, this lease basically refers to tenants that maintain good credit 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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Both franchise and regional tenants are actually small for the rating agencies to monitor. With this in mind, it is suggested 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. The corporate parent can provide better rent stability in midst of economic downturn while the rent stability means improved stability for the price and value of your real estate.
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Number 2. Long Term – as for long term, it is usually fixed length obligation in lease term or beyond ten years. There are advisors or brokers that can also include lease option as part of fixed lease term. It is vital to distinguish between obligations and options. If the tenant for instance has option to renew for additional 5 years after the initial 5 year term, then the lease term has to be considered 5 year lease with additional 5 years in option and not a 10 year lease. As a client, you have to figure out the rent terms and on how long the tenant is obligated to pay as it makes a huge difference when considering your returns, risks, ability to acquire financing and also your ability to resell property for profits. Number 3. Net Leases – the types of leases to which tenants are in charge for operating expenses which include the structure, insurance and the roof are referred to as Double Net or NN and Triple Net or NNN leases. In pure NNN lease, it is covering such cost through term of lease is called also as absolute NNN lease. Some even call it as Triple Net that don’t include expense on roof or structure of the building. These leases are known precisely as modified NNN or double net NN leases.