Creative Real Estate Investing

When non-traditional methods are used to buy or sell a property, it is termed as creative real estate investing. It refers to unusual methods used for selling or acquiring real estate. Many kinds of creative real estate investing are practiced frequently.

Popular Types of Creative Real Estate Investing Techniques:

Seller Financing: This is an unusual real estate investing technique where the property owner offers to finance the buyer! The owner typically lends a portion of the equity to the buyer and receives regular monthly payments. The mode of repayment may differ, it may be a principle only payment and interest may be fixed or variable, all depending on the contract agreed upon by both of them. Sometimes the buyer gets to assume the sellers loan, which is written as an all inclusive trust deed. Loans for commercial property are termed as assumable loans where as residential loans are termed non-assumable. These two techniques are used widely among the creative real estate investing techniques.

Lease Options: This refer to a person signing a lease as well as an option to purchase the leased property within a fixed amount of time. The options usually are for short durations of time like 12 months etc. and the lessee agrees to pay an additional amount as an option fee which will be forfeited should the option not be carried through. There are lease purchase options that make it mandatory for a lessee to buy the property with the term of the option. The price of the property is fixed at the time of the agreement and no matter what the land value; the lessee has to pay the amount stated in the agreement. Sandwich lease options are methods of buying a lease option and immediately selling it to another buyer for a profit, which will be shared by the owners.

When mortgages are defaulted the owner may try selling the property to the lender asking him to accept a lesser amount than what is owed in the mortgage.

Another technique is to buy bulk property from banks etc and sell them individually for a small profit. Using tax liens to acquire property is also a creative real estate investing technique. Investors buy tax liens from the government and should the homeowner default, the investor may foreclose the house. Some people buy a property that is ugly or old and unfit, make a few changes and give it a facelift, and are able to sell it for a huge profit.

The scope for being successful by investing in real estate is astounding. With careful planning and using creative real estate investing techniques, a person can make a huge profit as well as build a successful career dealing in real estate.

Real Estate Investing: Percentage Leases

Multiple tenant commercial real estate buildings that house retail shops or shopping malls are usually leased to the different tenants. They operate several diverse businesses under the same roof using a percentage lease. In a percentage lease, the owner is paid a base rent plus a percentage of the tenant?s gross receipts. The rent is determined by the amount of business done by the lessee. This type of lease is used most commonly by a single entity that rents or leases a multiple tenant commercial building leased to numerous retail shops or shopping malls, as they are more popularly known. Investors see percentage lease as benefiting both the owner as well as the tenant.

The owner has superior returns, whereas the tenant has the advantage of a lower rent structure. The percentage charged is usually 10% to 12%, and is paid annually, semi-annually or quarterly. Some other owners demand even on a monthly basis. It depends on the type of property, the location, its desirability and the sales volume of the lessee. This type of lease requires that the tenant periodically keeps furnishing the gross receipt to the owner, which may be a deterrent and may cause tenants to change their mind about agreeing to the lease. They have to produce their sales books, IRS form attachments or their sales tax records.

Types of Rent Discrimination and Percentage Leases; The one main advantage of a percentage lease is the risk sharing by the landlord and the tenant. The landlord will benefit if he discriminates in charging rents to different tenants. In simple rent discrimination, the landlord charges each tenant under the same tenant classification such as boutiques a particular rent and other such classifications of tenants? different rents as per the nature of the business. In perfect rent discrimination, each tenant is charged a different rent to ensure the landlord gets the maximum profit.

The tenants do generally not prefer percentage leases but they will comply if the owner of a desirable, well-suited and well-located property demands it. The tenants have to comprehend the terms of the lease before they sign it. They have to be very specific in making clear what accounts for the gross receipt, which can exclude some items such as returned goods, delivery and installation charges, sales tax, mail order sales etc. and other such deductible items as per the nature of the business.

Percentage leases are also used in the farming sector where owners receive a percentage of the crop grown and harvested; the owners make profit by selling his percentage of the crop. The normal percentage lease usually charges 30% to 40% depending upon the quality of the farmland. The percentage lease is therefore not a very popular type of lease.

There are firms that offer services as well as products to help new businesses succeed.

Creative Real Estate Investing

When non-traditional methods are used to buy or sell a property, it is termed as creative real estate investing. It refers to unusual methods used for selling or acquiring real estate. Many kinds of creative real estate investing are practiced frequently.

Popular Types of Creative Real Estate Investing Techniques:

Seller Financing: This is an unusual real estate investing technique where the property owner offers to finance the buyer! The owner typically lends a portion of the equity to the buyer and receives regular monthly payments. The mode of repayment may differ, it may be a principle only payment and interest may be fixed or variable, all depending on the contract agreed upon by both of them. Sometimes the buyer gets to assume the sellers loan, which is written as an all inclusive trust deed. Loans for commercial property are termed as assumable loans where as residential loans are termed non-assumable. These two techniques are used widely among the creative real estate investing techniques.

Lease Options: This refer to a person signing a lease as well as an option to purchase the leased property within a fixed amount of time. The options usually are for short durations of time like 12 months etc. and the lessee agrees to pay an additional amount as an option fee which will be forfeited should the option not be carried through. There are lease purchase options that make it mandatory for a lessee to buy the property with the term of the option. The price of the property is fixed at the time of the agreement and no matter what the land value; the lessee has to pay the amount stated in the agreement. Sandwich lease options are methods of buying a lease option and immediately selling it to another buyer for a profit, which will be shared by the owners.

When mortgages are defaulted the owner may try selling the property to the lender asking him to accept a lesser amount than what is owed in the mortgage.

Another technique is to buy bulk property from banks etc and sell them individually for a small profit. Using tax liens to acquire property is also a creative real estate investing technique. Investors buy tax liens from the government and should the homeowner default, the investor may foreclose the house. Some people buy a property that is ugly or old and unfit, make a few changes and give it a facelift, and are able to sell it for a huge profit.

The scope for being successful by investing in real estate is astounding. With careful planning and using creative real estate investing techniques, a person can make a huge profit as well as build a successful career dealing in real estate.

Real Estate Investing: Triple Net Lease

A net lease refers to a lease agreement where the lessee is responsible for paying the property taxes, maintenance, insurance, for the utilities and for the janitorial services. Of the net leases, the most common type is a triple net lease.

Triple Net Lease or NNN Lease: A triple net is also known as a NNN lease. As per a triple net lease, the tenants are responsible for operating and maintaining the property as well as the common area maintenance, which will be divided among the tenants in proportion to the area they rent. The landlord is responsible only for the structural integrity of the building. The tenant pays the landlord a base monthly rent and is responsible for the maintenance and the operational costs of all utilities as well as that of the property. The tenant has a few legal defenses to relieve him of his responsibility while using a triple net lease.

Absolute Triple Net Lease: It is also referred to as a bond lease. It is similar to a NNN lease, but differs in that the tenant has no legal defenses if he fails to meet his responsibility of paying the maintenance and operational costs, property taxes and insurance, utility and janitorial expenses etc.

Investors dealing in commercial real estate look out for multi-tenant properties that have triple net leases, as all they have to do is deal with how to invest the rent paid by the tenants. They like properties with triple net leases as they are not bothered by management obligations and have an assured income. On finding such a property, they have to take extra care with the due-diligence and study every document relating to the building as well as study the lease agreement in detail seeking the counsel of an experienced attorney.

Triple net leases have to be carefully drafted to compensate for inflation as well as tax increases, which could influence the rent and thereby affect the lease. The landlord should be very careful in selecting tenants by checking their credit worthiness, the type of business they do and how it will have a positive or negative impact on the property has to be analyzed carefully. If an investor is buying a property with a triple net lease tenant or tenant, the lease agreement has to be carefully scrutinized and the lease term has to be checked, and then carefully reviewed to see if the existing tenants would agree to an increase in the base rent as well as check the credit worthiness of the tenants. It is an investors dream to land a multi-tenant commercial property with a true triple net lease but they are a rarity.

There are firms that offer services and products to help new businesses succeed.

Real Estate Investing: Percentage Leases

Multiple tenant commercial real estate buildings that house retail shops or shopping malls are usually leased to the different tenants. They operate several diverse businesses under the same roof using a percentage lease. In a percentage lease, the owner is paid a base rent plus a percentage of the tenant?s gross receipts. The rent is determined by the amount of business done by the lessee. This type of lease is used most commonly by a single entity that rents or leases a multiple tenant commercial building leased to numerous retail shops or shopping malls, as they are more popularly known. Investors see percentage lease as benefiting both the owner as well as the tenant.

The owner has superior returns, whereas the tenant has the advantage of a lower rent structure. The percentage charged is usually 10% to 12%, and is paid annually, semi-annually or quarterly. Some other owners demand even on a monthly basis. It depends on the type of property, the location, its desirability and the sales volume of the lessee. This type of lease requires that the tenant periodically keeps furnishing the gross receipt to the owner, which may be a deterrent and may cause tenants to change their mind about agreeing to the lease. They have to produce their sales books, IRS form attachments or their sales tax records.

Types of Rent Discrimination and Percentage Leases; The one main advantage of a percentage lease is the risk sharing by the landlord and the tenant. The landlord will benefit if he discriminates in charging rents to different tenants. In simple rent discrimination, the landlord charges each tenant under the same tenant classification such as boutiques a particular rent and other such classifications of tenants? different rents as per the nature of the business. In perfect rent discrimination, each tenant is charged a different rent to ensure the landlord gets the maximum profit.

The tenants do generally not prefer percentage leases but they will comply if the owner of a desirable, well-suited and well-located property demands it. The tenants have to comprehend the terms of the lease before they sign it. They have to be very specific in making clear what accounts for the gross receipt, which can exclude some items such as returned goods, delivery and installation charges, sales tax, mail order sales etc. and other such deductible items as per the nature of the business.

Percentage leases are also used in the farming sector where owners receive a percentage of the crop grown and harvested; the owners make profit by selling his percentage of the crop. The normal percentage lease usually charges 30% to 40% depending upon the quality of the farmland. The percentage lease is therefore not a very popular type of lease.

There are firms that offer services as well as products to help new businesses succeed.