Lease Strategies in Investment Sales

When meeting with a property owner to discuss the sale ?f ? property ?ou ?h?uld h?v? ? good practical knowledge related t? established leases ?n the area. This includes th? rents th?t ar? achieved in the local market. It is th? rents ?nd leases that underpin th? performance of th? asset as ?n investment. This knowledge will help y?u identify if th? property is 'lease attractive' or 'lease weak' fr?m th? perspective ?f the buyer; it w?ll affect ?our price, th? target market, ?nd th? time ?n market.

The important point h?re ?s that for y?u t? sell an investment property, y?u n?ed to kn?w the rents, h?w they work, ?nd wh?t should be th? b?st rent structure f?r each property type ?n the prevailing market. Great rents and leases produce great investments and in turn produce better sales.

Given that leases ?nd rents change w?th the business sentiment ?nd economic environment, you ar? the real estate professional that ?an h?lp the landlord with th? best strategy f?r the long term. It d?e? not r?ally matter (within reason) what th? start rent i? ?n a lease, but r?ther ?ts escalation over time ?h?uld b? the main focus ?n any new lease. That ?hould b? y?ur strategic priority.

Rents ?r? Unique

Rents ar? unique to the property type and th? location, so ?ven ?f y?u specialise ?n selling ?u?t industrial property it ?s ver? mu?h th? case th?t industrial property fr?m suburb t? suburb will vary ?n rent level, strategy, ?nd type. You need to know h?w and why th? chang?? occur. The mor? skilfully ??u can talk ?b?ut that and package ?t t? th? client ?r th? customer, th? m?r? professional you will b? in th? provision ?f commercial real estate services. When ?on?ider?ng y?ur competitive position that ?? what matters.

Variables

Rents ?an b? gross ?r net b? type and added to th?t w?ll be the levels of outgoings that apply ?n ??ch location. Outgoings ?n ?our property sale must b? ?n parity t? ?th?r properties in th? location ?therwi?? y?u will be tr?ing t? sell something that i? d?ffer?nt th?n ?veryth?ng else. Whilst th?t m?? b? acceptable for ?our listing, ?ou will h?v? to identify wh? the outgoings ar? higher ?nd why ??meone will w?nt t? buy ? property l?ke that.

The 'golden rule' h?re ?? th?t y?ur market awareness ?n leasing ?s fundamental t? your sales skills and v?lu? provided to landlords.

Some Rent Strategies

So let's lo?k ?t some rent definitions that you frequently ??m? across.

'Market rent' is that rental determined b? assessing ? g?v?n tenancy ?nd its location ?nd w?th its size, and then comparing it t? oth?r similar tenancies. Care mu?t be t?k?n in locating ?ther 'market rents' be?au?? they may h?ve be?n established by alternate means such as CPI adjustment, Fixed % adjustment, Ratchet, ?r Cap ?nd Collar. In th?t case they are not real market rents and are not u??ful in ?n? rent comparison. - True market rent comparisons are generally n?t t? be restricted or enhanced b? Ratchet clauses (this stops the rent falling), ?r Cap ?nd Collar limitations (this stops th? rent rising too f?r or falling too far). These mechanisms d? commonly exist ?n Commercial and Industrial type leases and tenancies. They ?r? ?ometim?s restricted by legislation ?n application in retail lease situations. Make sure ?ou kn?w ?our local legislation in th?t regard ?? th?t the lease rent escalation method ?? legal.

'Base rents' ?re s?m?tim?s us?d ?? ? 'floor' rent bel?w wh??h the tenants rent would not fall. This g?v?s ?om? stability t? th? Landlords cash flow ?n a new lease occupation. In ? n?w retail property development w?th unstable or growing levels of trade, th?? is a u?eful tool. A lease w?th a 'Base rent' i? usu?lly enhanced w?th ? turnover rental provision or clause, ?o th?t th? success of the tenants business and sales w?ll lift the rent level. - This 'turnover' is structured b? ??m? calculation from th? tenants monthly trade ?uch as:

a) 'The rent paid sh?ll b? th? greater ?f th? 'Base rent' or 10% ?f th? lessee's turnover f?r the previous month'.

b) In this scenario, the % may change ?nd the method of turnover calculation ma? be revised ?t the anniversary ?f a nominated period. This is u?u?lly onc? p?r annum, ?nd th? adjustment f?r ?n? extra rent (as a result of the turnover) ?b?ve th? base is calculated and charged.

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