Cap rates, the GOD of terminology in Commercial Investments. LOL… This is the most widely used term to describe a properties cash flow.  As a property ages, and becomes a little more LESS stable you will see an increase in Cap Rates.  Can an 8% Cap Rate with Anchor Tenants be treated the same as Mom & Pop Tenants?  No they cannot be… Landlords are concerned about STEADY cash flow,  not thinking the tenants may not be able to pay their rent.   Landlords need a history of payments, and a financial/credit history for the tenants as well (upon transferring ownership).

Here are some tips when purchasing a income producing property:

  1. Review leases
    1. Review estoppel certificates
  2. Make sure each tenant has;
    1. Personal Guarantee
    2. Anchor Guarantee
    3. or Lease Guarantee / Bond
  3. Review each tenants credit report with tri-merged credit score
    1. On lease applications (they give the landlord the right to review credit)
  4. Talk with each tenant and confirm they are not leaving anytime soon,
    1. Ask if they are happy
    2. What can we do to make it better

 

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