How does Commercial Real Estate Work Exactly?
Any real estate that is utilized for business reasons (such as retail, hospitals, etc.) rather than residential is classified as commercial real estate. Because of the long lease terms (typically several years or more), commercial real estate is considered a more reliable investment than other forms of real estate. Do you want to go into commercial real estate investing? Employ the services of a real estate agent.
Basics of Commercial Real Estate
Are you considering investing in commercial real estate? Commercial real estate offers a wealth of opportunities for both investors and renters, as well as for real estate agents. However, before you go out seeking for that opportunity, you need to educate yourself on the fundamentals of commercial real estate.
We'll go over the basics of commercial real estate terminology, the differences between commercial, residential, and industrial real estate, and how to invest in commercial real estate in this post.
Definitions of Commercial Real Estate
First and foremost, what exactly is commercial real estate?
Commercial real estate is used for commerce (or commercial reasons), while residential real estate is used for living. Office buildings, hospitals, retail space, and land are all examples of commercial real estate.
Multi-use commercial structures, such as a restaurant in an office building, mix two forms of commercial real estate.
Commercial real estate is often more costly than residential real estate, such as a single-family home, and needs a larger number of investors.
N Lease (Single-Net)
In a single-net lease, the tenant is responsible for paying both the rent and the property taxes on the building. The landlord is responsible for all repairs, upkeep, and insurance.
NN Lease (Double-Net)
A double-net (NN) lease requires the tenant to pay both rent plus property taxes and insurance. The landlord is responsible for all repairs and upkeep.
NNN Lease (Triple-Net)
In a triple-net (NNN) lease, the tenant is responsible for the property's taxes, insurance, and upkeep.
NNN leases are most attractive to truly passive investors. Working with a professional commercial real estate brokerage firm such as Pillar Real Estate Advisors, allows an investor to make decisions on which asset to purchase based on a multitude of criteria including how involved the investor wants to be in the day to day business of owning the property.
A gross lease is one in which the tenant is solely liable for the rent and the landlord is responsible for the property's upkeep, taxes, and insurance.
Real Estate Class A
A Class A building is in a prominent location, is well-maintained and updated with high-quality materials, and often has workers on hand to maintain the property and cater to the renter's guests/customers. These are often the best-of-the-best, with a price tag to match.
Real Estate Class B
A Class B structure is one that is a little older and out of date. They are typically more inexpensive, and they are often sought after by investors looking to upgrade their properties.
Real Estate Class C
Class C buildings are the oldest (20 years or older), and they are often in disrepair and located in the less desirable areas of communities. Because of the nature of the repairs and the location, investors are sometimes hesitant to invest in these structures.