Is it hard to communicate with someone if you don’t speak their language? Of course it is! Why would you even consider putting your money at risk if you literally do not know what you’re talking about? So it is we bring the following list of commercial real estate terms to your attention. Don’t consider this information all-inclusive or exhaustive, but it is at least a starting point.
Appraisal – This is an unbiased, written opinion delivered by a state licensed professional regarding the property’s value and the reasoning that led to his opinion. An appraisal must be done before a house can be sold.
Broker – A real estate professional, licensed by the state, who’s role is to bring together a buyer and seller or landlord and tenant. A broker works on commission, negotiates the transaction, and insures all paperwork is filled and filed correctly.
Build to Suit – This is when a landlord (property owner or developer) agrees to finish out a property to the buyer’s specifications, tailored to his particular business. A build-to-suit arrangement usually only applies to 10 year leases or longer.
Concessions – Not hot dogs or nachos, concessions are discounts or consideration given by the buyer, seller, or both that allow the deal to proceed. Think of it as “I’ll do this if you’ll do that.” Concessions during the course of negotiation are what allow deals to get done.
Escalation Clause – Since commercial lease deals are often long term affairs (10 years, 25 years, or more), it’s reasonable to believe that rent should rise at some point over the course of the deal. No tenant is going to expect to still be paying 2011 rental rates in 2030. An escalation clause allows the rent to rise according to agreement. Often, the rise is tied to a government cost-of-livng index or other indicator.
HVAC – Acronym for Heating, Ventilation, Air Conditioning system. Proper flow of heat and air conditioning is critical for the comfort of tenants and customers alike. The landlord is usually responsible for the maintenance of these systems.
Lease – Like a residential lease, a commercial lease is an arrangement by which a landlord allows a tenant to occupy a space for a certain period of time, and for an agreed upon cost, which is normally paid monthly. In commercial leases, there are straight leases, percentage leases, and net leases.
Alrighty then, are you ready to go out and become the next Donald Trump? If these terms constitute your sum knowledge about the field, we’d say no, but it’s a start.
The Commercial Investing Center Team
Flickr / Sweet One