Incredible Lessons I’ve Learned About Tips

What Are the Benefits of Hiring Investment Grade Tenants?

If you happen to own a property that is for rent, then you know how important investment grade tenants are. 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 is investment grade rating?

With investment grade ratings, credit tenant lenders will be able to determine if the tenant can get loans and sell them to other investors. Investment grade simply means that you have reached a minimum rating of BBB-. 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, 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 simply means that there is no risk of personal liability because this kind of loan greatly depends on the value of the lease.

What is the significance of sale leaseback transactions?
Direct financing is made possible on the part of the credit tenants if they get themselves involved in sale leaseback transactions. 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. Opposite with the typical commercial real estate kind of loan, any property owner can increase their cash by obtaining a higher loan-to-value amount in favorable terms.

Some credit tenant lease terms you should know about

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. Typically, credit tenant leases comprise 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. All of these obligations greatly rely upon the tenant, meaning this burden is no longer a responsibility of the landlord. 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.

Recommended reference: go to this site