Who pays pest control? Our family’s restaurant gets billed 2-3k every time we get termite issues
Do you have to pay a signage fee? Landlords sometimes charge rent to have you put your sign up
Sublease vs Assignment. Can the tenant sublease their unit to another tenant? A sublease means the original tenant is still liable, where an assignment transfers
Use clauses. Competition with other tenants in the space. More flexible is better for the tenant
Attornment clause. Who is paying who, protection when paying new landlords
Estoppel. Legal instruments prevents from saying something contrary
Subordination clause. Tenant rights are below that of the lender, future buyer, etc
Nondisturbance clause. Business can still operate while building is being foreclosed
Utilities cost clause. How is electricity cost split? Direct meter (common for single family), submeter (charged and managed by the landlord), or prorated (common for older buildings)
Escalation clause. Ceiling or expense caps are helpful for limiting property operating costs.
How much longer is the lease? The value of leases declines as the term gets reduced. A 20 year lease is also worth more than a 5 year lease of course
How is the cost of electricity distributed to tenants?

Market vs In Place Rent

Run Lease Comparables:

• Market vs. In-Place Rent: Newly constructed Triple Net (NNN) properties often have rents that include construction costs, leading to above-market rates. Always compare the current lease terms with prevailing market rents

Strategies for Vacant Properties:

• Entitlement Process: Some investors secure contracts on vacant properties and initiate the entitlement process to make the property suitable for a specific tenant.

• Financing Challenges: Lenders often require a signed lease agreement before approving loans, as a committed tenant reduces the investment’s risk profile.

• Seller Preferences: Sellers may be reluctant to tie up their properties for extended periods (e.g., 6-12 months) during the entitlement and tenant placement process. They typically prefer quicker transactions to minimize holding costs and market exposure.

Competitive Bidding Tactics:

• Waiving Contingencies: To expedite deals, some investors waive standard contingencies (e.g., financing, inspection, or zoning approvals), making their offers more attractive to sellers.

• Associated Risks: This approach increases exposure to potential issues, such as unforeseen property defects or financing challenges.

Mitigating Risks with Tenant Commitments:

• Letters of Intent (LOIs): Securing LOIs from prospective tenants before finalizing the purchase can demonstrate serious interest and facilitate financing approvals.

• Due Diligence: Thoroughly vet potential tenants to ensure their business stability and suitability for the property.

Save Reading Lease Abstracts

Extract Text from PDF: Use a reliable tool to convert the lease PDF into plain text while preserving its structure.
Identify Key Lease Elements: Determine essential details such as:

Lease commencement and expiration dates
Tenant and landlord names
Monthly rent and payment terms
Renewal options
Maintenance responsibilities

Craft a Structured Prompt: Develop a clear prompt to guide Claude in extracting the necessary information.

Please extract the following details from the lease agreement text provided:
- Lease Commencement Date
- Lease Expiration Date
- Tenant Name
- Landlord Name
- Monthly Rent Amount
- Payment Terms
- Renewal Options
- Maintenance Responsibilities

Lease Agreement Text:
[Insert extracted text here]

Input Prompt into Claude: Use Anthropic’s API or console to submit the prompt along with the lease text.
Review and Refine: Assess the generated abstract for accuracy and completeness, and adjust the prompt as needed to improve results.

Numbers to Pay Attention to

Market Rent
Absorption & Vacancy rate
Building permits & Supply

Special Lending for Non-Residential Real Estate

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At this point, it would be beneficial to have befriended a few local banks or credit unions who can be more flexible with debt terms.

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Owner Operators

Pros, tax advantages & SBA loans

Depreciation
Deduct the cost of loan points, closing costs, property tax, operating expenses, and mortgage interest from their taxes.

PACE Financing

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Lumen.ai is a software that focuses on helping you discover if it’s worth upgrading your building through PACE. Because NNN deals pass on the cost of property taxes to the tenants, this is often a win-win if your tenants can save on the electricity & water bill.

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Property Assessed Clean Energy (PACE) financing is a way for property owners to fund energy-efficient and renewable energy improvements without paying upfront. Here’s how it works:

Financing Energy Upgrades: If you want to install solar panels, upgrade your heating and cooling systems, or make other energy-saving improvements, PACE provides the necessary funds.
Repayment Through Property Taxes: Instead of a traditional loan with monthly payments, you repay the financing through an additional charge on your property tax bill over a set period, often up to 20 or 30 years. (Pace Nation)
No Upfront Costs: This structure allows you to start saving on energy bills immediately, as the cost is spread out over time.
Transferable Upon Sale: If you sell your property before fully repaying the PACE financing, the remaining balance typically transfers to the new owner, since the repayment is tied to the property, not the individual. (Consumer Financial Protection Bureau)
As of Nov 4, mosts construction loans are ~10%+

Commercial Leasing

🚩 Lease Terms to Pay attention To 🚩

Lease Due Diligence