The Beginner’s Guide to Resources
What Are the Benefits of Hiring Investment Grade Tenants?
If you are an owner of several properties that are for rent, then it is a must that you hire investment grade tenants. Investment grade tenants offer landlords numerous financing options they can choose from.
Investment grade tenants get to receive an investment grade rating from any rating agency, and they are usually big, reputable companies. Lenders typically provide financial assistance to tenants depending on their landlord’s credit or the value of the real-estate, but when it comes to credit tenants, everything now depends on the tenant himself as well as the value of the lease payments he will be making in the following months.
So, what is investment grade rating all about?
It is the investment grade ratings of a tenant that help credit tenant leaders decide if the tenant can avail of loans and sell them to investors. Getting a minimum rating of BBB- is what investment grade is all about. A lot of investors opt to make investments with products and bonds that are backed by investment grade tenants such as Home Depot and Walgreens. States and cities are also major participants of the credit tenant financing industry.
So, how do you get credit tenant loans?
If you are a landlord that has a credit tenant, then you are eligible in availing long-term loans to refinance or purchase a particular property. A non-recourse structure of loan is guaranteed to the landlord in the process. In simple terms, landlords will not have to face any personal liability threats because the terms of the loan is based on the lease value.
What is the significance of sale leaseback transactions?
When credit tenants get themselves involved in sale leaseback transactions, they can immediately do direct financing. If you own a property and have a investment grade rating of your own, then this means that you can simultaneously sell your property and then lease it back. In comparison to typical commercial real estate loans, property owners can now optimize their loan-to-value amount and increase their cash, thereby favoring them more.
What credit tenant lease terms should you be aware of?
Just because institutional investors offer credit tenant financing, this does not automatically mean that they also take on the responsibilities often imposed when one is a landlord. There are three net terms that comprise credit tenant leases. This simply means that credit tenants should shoulder whatever insurance, maintenance costs, and taxes they must pay. The loan terms must be in tandem with the duration of the lease. All of these obligations greatly rely upon the tenant, meaning this burden is no longer a responsibility of the landlord. From the point of view of both the investor and the landlord, credit tenant lease terms are akin to a corporate bond. This means that all they have to do during the real estate project duration is collect checks as well as not actively get themselves involved.
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