The Essential Laws of Tenants Explained

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. Landlords get to benefit from investment grade tenants because they offer a lot of financing options.

Investment grade tenants get to receive an investment grade rating from any rating agency, and they are usually big, reputable companies. 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 all about?

Investment grade ratings are the basis of credit tenant lenders to secure loans for the tenant as well as sell them to 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. The industry of credit tenant financing also includes the participation of sates and cities.

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. Such loans can follow a non-recourse structure for the sake of the landlord. 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 are sale leaseback transactions?
Direct financing is made possible on the part of the credit tenants if they get themselves involved in sale leaseback transactions. Owners of properties who have an investment grade rating can put their real estate property in the market for investors, and can then lease them again. 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. There are three net terms that comprise credit tenant leases. This means that credit tenants are the ones responsible in paying insurance, taxes, and maintenance costs. The loan terms will have to be parallel with the duration of the lease. These obligations are directly the responsibility of the tenant, so no landlord will have to carry this kind of burden. From the point of view of both the investor and the landlord, credit tenant lease terms are akin to a 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.

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