In this issue
- The Cancellation Clause In A Commercial Lease
Whether a rental market is weak or strong, lease negotiations can be difficult when the landlord wants concessions that are different from the norm. One situation that happens is when the owner of an office building or other commercial property intends to sell when market conditions improve, whether that occurs next year or five years from now. Another is the holder of vacant or underimproved property who plans to develop it whenever market conditions justify. In the meantime, these properties must be leased to generate sufficient cash flow to pay operating costs and debt service. Such an owner will be amenable to giving significant concessions, including a low rental, provided the landlord can cancel the lease during the term...
(more) Building on leased land results in a separate ownership of that building and the land. The two owners, one of the land, and one the improvement, come together in one investment parcel. In this situation, the landowner wants someone to develop the land, but still wants to continue in ownership. The developer prefers to lease rather than buy the property. One owner wants the security of owning the land with a good lease to the owner of the improvement. The owner of the building puts up less money since the ownership of land is not part of the expenses in the development....
(more)- How Adding Value Means Increased Cash Flow
Since the value of a rental property is based directly on the cash return, adding value means increasing cash flow. When small investors set out to increase real estate values, the steps are in upgrading houses, duplexes, triplexes, etc., enhancing the cash flow and therefore increasing equity when the property is sold...
(more)- Pre-Leasing For Construction Loans
Whether it’s a new office building, industrial warehouse, retail shopping center, or high-rise residential apartment building, investors and lenders increasingly demand to see a substantial portion pre-leased before they are willing to put up construction money. Purely speculative construction projects are rare in today’s real estate market....
(more)- How Property Management Increases Value
Management of a building is not just handling problems as they arise and renting units, it is making the asset more valuable to the owner by concentrating on every aspect of the property. Some owners of very large income properties still do not take professional property management seriously and fall behind in values...
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