When you’re new to investing in commercial lease properties, you’ll find out that the choices are endless. So, how do you find the right one that fits your goals? And once you’ve found it, how do you make sure the purchase goes smoothly?
In this guide, we’ll walk you through the entire process of finding and buying commercial properties lease sales. We’ll start with some tips on how to identify promising properties, and then, we’ll move on to the details of making an offer and closing the sale.
Read more about commercial real estate investment firm for the better property guidance.
Types of Commercial Property Lease Agreements
Before you start looking for commercial properties lease sales, it is important to know the types of lease agreements, first.
- Single Net Lease – the commercial property owner pays for the building insurance and utilities, while the tenant pays for the taxes on top of the rent.
- Double Net Lease – the commercial property owner pays for the building’s utilities, as well as any repairs, while the tenant handles the taxes and insurance premiums on top of the base rent.
- Triple Net Lease – in this type of lease agreement, the tenant will be responsible for most of the expenses in managing the property, such as taxes, insurance, and maintenance.
- Ground Lease – in ground lease sales, the future tenant leases the land and is allowed to build a building on it.
- Bondable Net Lease – this type of lease is similar to a triple net lease (NNN), but the tenant has the option to purchase the property at the end of the lease agreement.
Based on these types of commercial lease agreements, you can determine which type of property you should opt for to help you realize your investment goals.
Important Factors to Consider When Buying Commercial Lease Properties
Now that you know the different types of commercial leases, let’s move on to finding properties for sale. Here are the most important factors to keep in mind.
Location
Commercial property values are highly dependent on the location. So, you need to choose one in an area with high commercial value.
If you’re looking for long-term tenants, make sure that there are plenty of parking spaces as well.
Type of Tenant
If you are buying a triple net lease property, it’s important to consider what kind of business is occupying it. For instance, if you want a long-term tenant for your commercial lease property, it would be best to look for retail shops and offices, rather than restaurants or hotels, because the latter usually have shorter leases compared to the former.
Rent Price
This factor can determine if investing in a property is worth it or not depending on how much money you’re expecting to make from rent each month.
Generally, commercial leases are more expensive than residential leases, and the rent price for retail businesses and offices is usually higher than restaurants or hotels.
Building’s Condition
You should also inspect the property you plan on buying and make sure that it is in good condition. If not, factor in the cost of repairs into your offer.
Due Diligence Period
All commercial lease properties will have a due diligence period where the buyer has the opportunity to do an inspection of the property and ask any questions they may have about it before making an offer. This is generally around 30 days long, so be prepared to move quickly if you find a property you’re interested in.
Cap Rate
This is an important measure to consider, especially when you are buying commercial triple net lease properties. The cap rate is the percentage of the net operating income (NOI) that is paid out as rent.
So, for example, if a commercial property has an NOI of $100,000 and the cap rate is at six percent, then the tenant will be paying $6,000 in rent each month.
How to Search for Commercial Lease Properties
The easiest and most convenient place to start your search is the internet. All you need to do is use the right keywords, such as “properties sale near me”, and you will get good results for potential properties.
Another way is to visit listing sites. For example, if you are interested in buying NNN properties, then you should use an NNN lease properties website that other investors trust.
Of course, you can also get in touch with a commercial real estate agent. They will have access to current listings and be able to help you find the right property for your needs.
Making an Offer
When making an offer on net lease properties, there are three main things to consider.
Price
Your offer should be based on how much you’re willing to pay for the property and how much money you expect to earn from rent each month. You also need to account for any repairs that need to be done.
Terms
These include things like when the lease agreement expires; what happens if either party wants out early; and who pays for repairs and other maintenance costs.
Before making an offer on a property, you should also consider negotiating with them about the length of time before the first rent payment is due after closing day.
Some landlords may require tenants to pay their rent in advance, but others will allow them not to. You can always negotiate this point depending on how long commercial leases are valid for at your chosen location as well as what other commercial businesses nearby have agreed upon already.
The Lease Agreement Itself
Commercial leases are different from residential leases because they often involve rental periods longer than one year or even 10 years long. This means that some properties might require you to sign a contract lasting several months before moving in, so make sure there’s enough time left on yours if this is required—don’t get caught out by default terms!
If the commercial property owner doesn’t have any set rules about how much notice must be given when leaving, then you should negotiate an appropriate amount so everyone knows what their responsibilities will be ahead of time.
Closing the Sale
When closing the sale, it is important to have the agent that you hired and a real estate lawyer by your side. They will help make sure that the property is transferred to you without any issues and that all of the necessary paperwork is in order.
Make sure that everything you have agreed with the seller is included in the contract. If there are any maintenance costs that need to be taken care of or repairs done before signing, it’s worth negotiating with them so they don’t become an unexpected expense down the line.
Conclusion
Buying commercial properties lease sales is a great way to make money over time, build wealth, and achieve financial freedom. However, you should take your time when looking at your options. With the information provided in this article, you should now be able to buy the right property with confidence and ease.
For more useful tips on business and real estate, you can check out the other articles on our site. And, if you have some questions or comments, feel free to share your thoughts below!
