There are numerous ways to invest in real estate. You can rent, flip, or fix. There are condos, homes, apartments, land, and buildings to invest in. The options are limitless.

There is, however, a great divide some investors have a hard time deciding on, residential versus commercial investing.

Residential property is perhaps most commonly what comes to mind when thinking of real estate investing. In general, residential property is a living space. This can include apartments, duplexes, homes, and condominiums.

Commercial property, on the other hand, plays home to businesses in the form of office space, retail space and other industrial type tenants.

When considering which type of investing is best for you, there are a few questions to ask. Most of us have experience in residential dwellings. After all, we grew up in homes.

You have a set of expectations for your residential rental property. You know how you anticipate it to be cared for and what assumptions you want to see in your tenants. Commercial property is a little different. We haven’t all necessarily rented or owned commercial property.

What is unique about commercial property is the landlord often hands the property over to the tenant and has very little to do with it after that point. You basically have to trust in your tenant. Plus, unless you have business experience, you probably aren’t familiar with the guidelines and assumptions of commercial property leasing.

With all of that said, let’s look at what benefits and disadvantages come with investing in residential property.

1)In general, it is easier to rent residential property then commercial property. People always need a place to live. Businesses, however, come and go dependent on the market.

2)Financing residential property tends to be easier then purchasing commercial property.

3)If needed, you could actually live in one of your rental properties.

4)Residential property is usually less expensive then commercial.

5)Residential property can require your immediate attention when problems arise. Problems can come at any hour on any day unlike the traditional 9 to 5 business that rents commercial property.

6)As a residential landlord, you usually have to perform a lot of hands-on management.

7)If you have a single residential piece of property and you lose a tenant, you just lost all your income for that particular property until you can replace the tenant. This can cause cash flow problems.

Commercial property also has is pluses and minuses.

1)A nice thing about commercial property is the leases tend to be considerably longer then that of residential property. Where a residential tenant might sign a year lease agreement, commercial tenants usually stick around for five or so years.

2)Unlike residential, commercial property requires less management. Depending on your personality, this may or may not be desirable to you.

3)Commercial investing isn’t as beginner friendly as residential. Start-up costs can far exceed that of simply purchasing a home. Even worse, if can be harder for beginner investors to secure a loan for commercial property.

4)Finding a tenant for you commercial property can be a lot harder then securing one for your residential property.



Quick Property Sale

Many investors are looking for a safe place to put their money with the wild fluctuations in the financial market. Stable, predictable investment vehicles are increasingly hard to find, but smart investors do have choices. One of the better choices is to invest in single-tenant, net-leased properties, which many investors also call a corporate bond combined with real estate investments that still make sense today.

Here’s what you need to know about single-tenant, net-leased properties:

What is a single-tenant, net-leased investment?

A single-tenant, net-leased investment is typically a freestanding office, retail, or industrial building that is leased and occupied by one user or one company. Typically the tenant has committed to a long-term lease – usually longer than 10 years, and as long as 25 years with increasing rent over the lease term.

What is a net lease?

There are different types of leases for commercial property in the U.S. The two most common leases are full-service leases and net leases.

A full-service lease means that the tenant is paying one base amount to the landlord/owner to occupy the space and the owner pays all the expenses related to the building including insurance and property taxes. With a full-service lease, the landlord/owner also is responsible for all maintenance related to the building. For example, if a thunderstorm damages the roof, the landlord/owner must pay for the repairs.

In comparison, a tenant with a net lease is responsible for paying rent plus some or all of the operating expenses of the building such as taxes, insurance premiums, repairs, and utilities. Depending on how the leases are structured, they can be net-net leases or triple-net-leases. Specifically, in the case of a triple net lease, also known as NNN leases, the tenant agrees to pay all of the building’s operating expenses, real estate taxes and insurance.

How are single-tenant, net-leased investments different from multi-tenant buildings? Multi-tenant buildings have more than one tenant, and as a result, owners and landlords must juggle multiple leases that begin and end at different times. These leases are rarely longer than seven years. That means that the building’s financial performance is vulnerable to the ups and downs of the market.

Many net-lease investors have previously owned other types of real estate but are looking for an investment that requires less maintenance and supervision. For example, many apartment investors end up selling their high-maintenance properties and then reinvesting the sale proceeds in single-tenant, net-leased retail properties, as do many land owners who have previously never received any income or tax benefits from their property.

Who can invest in single-tenant, net-leased properties?

Net leased properties are appealing to a wide variety of buyers, from high net worth individuals to partnerships to large institutional investors like real estate investment trusts, life insurance companies and pension funds. Net leased properties also are very attractive to investors who need to do 1031 tax-deferred exchanges, or 1031 exchanges for short.

What are the benefits of investing in single-tenant, net-leased properties?

Many people consider single-tenant, net-leased properties as bond-like investments because of their stable, predictable returns. Because tenants commit to long-term leases, there’s very little re-leasing risk. Moreover, single-tenant, net-leased investments can be tailored to an investor’s risk-reward expectations by choosing tenants with different credit profiles. For example, some tenants are rated by national credit ratings agencies while other tenants have only their previous financial performance to recommend them.

What are the risks related to investing in single-tenant, net-leased properties?

While there are very few risks related to investing in single-tenant, net-leased properties, tenants with non-investment grade credit profiles offer higher levels of risk. But that risk typically provides higher returns as well. And investors always need to think about the “re-leaseability” of a property if the net-tenant were to vacate the space.

How are single-tenant, net-leased assets valued?

Unlike traditional real estate investments whose valued is determined exclusively by the real estate itself, a single-tenant, net-leased property’s value is determined by a combination of factors including the tenant’s credit, the length of the lease and rental escalations over the term, and, last but not least, the real estate. In markets where the real estate experiences wide valuation swings, a single-tenant, net-leased property will maintain its value because of its bond-like, long-term lease and the credit tenant guaranty for the lease.

When is the best time to invest in a single-tenant, net-lease property?

Net-leased properties are like all-weather tires. They are good investments in both good and bad economic times and in hot and cold real estate markets. Here’s why: a single-tenant net lease is guaranteed by a long-term lease at pre-set rental rates. As an owner, you know exactly who will be a tenant in your building, how long that tenant will be there and exactly how much rent they will pay you. That means you will derive a steady income from your investment, regardless of how the economy or real estate market is performing.

Net-lease properties are in high demand, as a 1031 solution. Calkain Companies  Net-Lease Sales offers single-tenant and triple-net investment properties for sale. Our NNN experts can help a buyer or broker find and purchase Net-leased and single-tenant investments nationwide. Net leases are great 1031 options. Net-leases with credit tenants are offered as sale-leasebacks, single ownership and Tenancy-In-Common (TIC) transactions. Calkain’s Net-lease team can help you buy or sell a variety of  Net-Leases, or an even wider variety of Tenants-In-Common (TIC) properties.. Most triple net lease agreements are long-term arrangements that last from 10 to 25 years A triple net lease property may be a suitable replacement property for a 1031 exchange. If you’re looking to defer the capital gains tax from the recent sale of a property, a 1031 exchange is an excellent alternative. In addition, a triple net lease property may be a great tool for estate planning. A triple net lease is only one of many commercial leasing options. In a gross lease, the lessee pays rent while the landlord takes care of everything else. Most people who rent their homes are familiar with the terms of a gross lease, as this type of lease is commonly used for residential properties. In a double net lease, the landlord assumes some of the costs of property upkeep. In a double net lease, landlords commonly cover parking, heating and cooling systems, and the structural integrity of the building.

The triple net lease is sometimes called a true net lease, because the landlord usually has no responsibilities related to building upkeep. For this reason, many commercial landlords favor triple net leasing options. The building can generate a high level of income while the tenant keeps it in good condition, generally making improvements as well. The tenant has many of the advantages of ownership, including control over the property, without the substantial capital investment that a new acquisition represents.

A triple net lease can be risky for a landlord. Some tenants may not be able to pay fees, or may allow the building to fall into disrepair. In extreme cases, a tenant may deliberately damage a building to collect insurance money. For this reason, some triple net leases include a reserve fund. The tenant makes regular payments into the reserve fund, which can be used to cover essential repairs in the event of emergency.

A triple net lease is individualized to the tenant and lessor. The terms of the contract may contain restrictions and stipulations to protect both parties. In some instances, for example, the terms of the lease may include a cap on total property taxes to be paid by the tenant. If the property taxes rise above a certain amount, the landlord will be responsible for covering the remainder.



Real Estate Professionals

Houston may seem like a city past the development stage, but the growth of this bustling metropolis is far from over. In fact, recent years have seen a boom in commercial real estate Houston and in the number of residential properties being built. If you are looking to invest in commercial land for sale Houston, now is the perfect time to do so. But before you begin, there are some tips that will help you to get the biggest bang for your investment buck.

First, master planned communities are the new hot commodity in the Houston area, both for residential and commercial investments. If you are on the hunt for commercial land for sale Houston, begin with a search of the new master planned communities in the area. These neighborhoods will include property for residential development as well as numerous retail sites. The retail pads that are available in these communities show great potential for profit margins in the center of these busy communities.

A good way to get in on the ground floor (so to speak) of commercial real estate Houston is to purchase as much ground lease for sale as possible while you can. Ground leases allow an investor to purchase the land itself and then rent it to a developer that will build upon the site. Ground leases can range from five to 30 years, and can be a tremendous benefit to those who can afford to invest in the land but do not have the capital to put into developing a building.

Another good way to invest in commercial real estate Houston is by a triple net lease that will allow you to rent your property without the worry of taxes, insurance or upkeep on it. The tenant is responsible for all of the above, and will do so with great care since a well-maintained site is essential to building and keeping business. Triple net leases are generally longer terms that can go as high as 50 years in some cases. The benefit to the tenant is the ability to perform updates to the property as an owner would without the high cost of ownership.

While either of these types of real estate investments comes with numerous advantages, there are risks involved as well. The best advice is to speak with both commercial real estate agents and attorneys before making the move on commercial land for sale Houston.



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