How I Achieved Maximum Success with Investments
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 provide landlords with several financing choices.
Investment grade tenants are usually companies that have their very own investment grade rating that is made by a specific rating agency. If a credit tenant rents a property, instead of lenders providing financial assistance based on the landlord’s credit or the value of the real estate, they depend more upon the tenant as well as the value of the lease payments he or she will be paying in the future.
So, what are the basics of investment grade rating?
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. The majority of investors only choose to invest in products and bonds that are being back up by tenants with investment grade such as Home Depot and Walgreens. States and cities are also major participants of the credit tenant financing industry.
So, what should you know about credit tenant loans?
With the aid of a credit tenant, any landlord can now refinance or purchase a property by being eligible in processing long-term loans. A non-recourse structure of loan is guaranteed to the landlord in the process. This basically implies that the landlord will not be at risk of personal liability because these loans depend more on the lease value.
How do you transact sale leasebacks?
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 are credit tenant lease terms?
Institutional investors only offer credit tenant financing opportunities, and it does not necessarily mean that they are the ones who are now taking over the landlord’s responsibilities. Most credit tenant leases have three net terms. This implies that it is the responsibility of credit tenants to pay for their taxes, insurance, and maintenance costs. The loan terms must be in tandem with the duration of the lease. It is the role of the tenant to make sure that all of these obligations are carried out, implying that landlords no longer need to deal with such burden. From the standpoint of both the investor and the landlord, credit tenant lease terms function the same as corporate bond. What they just basically do during the entire duration of the real estate project is not get involved actively and just collect the check.