Determining whether a commercial income property in Florida meets your investment needs begins with asking a series of questions about the property. If you have an appointment with a broker, you may already have some questions in mind, but make sure you add the questions below to the list. As you evaluate US investment property with the assistance of a broker, answering these questions will help you decide whether investing a property is worth further investigation.
HOW MUCH TIME REMAINS ON THE LEASE?
Most people invest in triple net properties to acquire a secure stream of income. Concerning length of ownership, income security inevitably depends on the time remaining on the lease. For most investors, acquiring US investment property that has several years remaining on the lease is the optimal scenario.
IS THE LEASE RATE ABOVE OR BELOW MARKET VALUE?
A property that has an above market lease rate may seem more lucrative than it would be in the long run. If the market stays the same, what is the chance the tenant will renew the lease at the current rate? By the same token, a property with a below market rate may have more long-term value than one suspects.
DOES THE LEASE AGREEMENT HAVE ESCALATION CLAUSES?
An escalation clause is a clause in a lease agreement that permits the adjustment of a price or rent based on an event or index. Clauses can benefit the tenant or property owner. It is crucial to clearly understand its escalation clauses before you purchase a leased US investment property in Florida.
IS THE TENANT A CORPORATION OR AN INDEPENDENT COMPANY?
Corporations that have extensive marketing resources and access to deep investment capital often make better tenants than independent companies that lack these advantages. While there are always exceptions to the rule, independent tenants tend to be less resilient to adverse market conditions.
HOW EASY WOULD IT BE TO LEASE THE BUILDING TO ANOTHER TYPE OF TENANT?
What happens if the tenant leaves at the end of the lease? Is the building designed for only one type of tenant, or could other tenants inhabit it after making minimal changes to the building? If the lease on a property will expire in the near future, and the tenant is unsure of its plans, this is an important question.
DOES THE BUILDING NEED REPAIRS?
If so, is the current owner willing to pay for repairs, or is the property for sale as is? If the property is sold as is, what is its effective worth? Bear in mind: as ostensibly ideal as a location and building may be, you may have a hard time renewing the lease if the building has unresolved maintenance issues.
IS THE PROPERTY EASILY ACCESSIBLE TO CUSTOMERS?
Some properties that seem easily accessible to customers are not popular destinations. The problem could be as simple as how a building is situated in relation to a highway exit, or how it sits just off the beaten path of a foot shopping district. Accessibility should be based on numbers, not appearances.
IS THE AREA DEPENDENT ON SEASONAL BUSINESS?
Businesses in some Florida cities see their income rise and fall with the change of seasons. If income skyrockets during the in-season, it may be enough to compensate for the dip in revenue that happens in the offseason. Investigating a business’ historical quarterly performance will help make the determination.
Answering the questions above helps you determine whether triple net properties are a good fit for your investment plans. Your broker will have information about the financial details of an income property, but before you discuss that information, it helps to take a broad look at the property to assess whether its general characteristics support your goals. Westwood Net Lease Advisors will help you answer any questions that assist in making this assessment.
