What exactly is Commercial Real Estate?
There are 3 main types of real estate: Residential, Industrial and Commercial. For the purpose of this article, we shall talk about Commercial Real Estate only. Residential Real Estate means properties that are used for the purpose of living, while Industrial Real Estate means properties that are engaged in the practice of production and manufacturing. When it comes to Commercial Real Estate, it means properties that are occupied by business and commercial entities that seek to earn profits from the buying and selling of goods and services. It can also refers to the practice of collecting rent from properties as a proprietor. The rent can be monthly, quarterly or yearly.
If you are the proprietor of a property, then you lease out your property to tenants in return of money. For you it is a lease, while for them it is a rent. This is why the tenants say that they need to pay rent every month. Now, leases can continue for 1 year or 10 years, as decided by the property owner and as agreed by the tenants. If you have a large property in a central location, the lease period shall be longer while the sum of money to be paid each month shall be larger. Longer leases produce more security especially when it comes to credit tenants. Shorter leases offer a lot of flexibility to adjusting when it comes to paying of rent, and this is popular among the people naturally.
Now, there are 4 main types of commercial property leases. Each of these can be said to be a level, each of which means a different responsibility for the tenant and the proprietor.
- The Single Net Lease- This variation makes the tenant legally responsible for the payment of property taxes.
- The Double Net Lease or the NN- This makes the tenant legally responsible for the payment of insurance and property taxes.
- The Triple Net Lease or the NNN- This is the type in which the tenant is legally responsible for the payment of insurance, property taxes and maintenance.
- Gross Lease- Under this kind of lease, the tenant is only expected to pay the rent. The property owner himself pays for the rest. This is therefore the most basic kind of lease and is the most common, especially when it comes to small properties.