All Forum Posts by: Robert T.

The leases are enforced so all tenants end up paying eventually.  If it's a balance the tenant can't pay in one shot we would allow them to pay in installments.  

During the crisis in 2008, some tenants were just barely making it and some magnanimous landlords agreed to waive any reconciled balance due.

 I agree with Joel. In SoCal this is also typical for modified gross office leases and net leases. Tenants pay their share 1/12 estimated annual expenses each month. Reconciliation happens by April of the subsequent year typically.

Josh

Hi Robert,

On the retail side you have the fixed base rent in the lease and then CAM per sq ft the retailer pays an estimated amount every month.

End of the year audit shows if the tenant overpaid by a few hundred or underpaid etc.

If the tenant does not pay the additional CAM shown from the audit year end they would be in violation of the lease.

They should all pay. If they don't, they are in default of the lease. Do you have concerns with the end of the yer coming up?

A few things to note:

1. Unless you're dealing with larger national or corporate tenants, there is a pretty good chance the Tenants will need a lot of hand holding as you explain the reconciliation process and any monies owed, etc. be prepared for a pushback, especially if they owe money.

2. if the property is well managed, the reconciliation should be a breeze and most Tenants should not owe or receive credits of more than a few hundred dollars. Budgeting and completely understanding all facets of a Tenants lease are important steps to preparing an accurate estimate each year.

3. If you deal with a larger or national Tenant, be prepared for an occasional 3rd party audit (if allowed under the lease). Keep good records and make sure all invoices are billed correctly and have clear descriptions and locations of all services. If you are audited, and they find large discrepancies, the Tenant will expect answers and an immediate credit, and in some circumstances make the Landlord pay for the audit. Not to mention subject further CAM billings to additional scrutiny. 

CAM reconciliations can be difficult for both Landlords and Tenants at times. A small 10,000 SF single use NNN property would be very simple, whereas a large class A 1,000,000 SF multi-tenant high rise tower would be quite complex.

What are your opinions on the best real estate investments out there?  This answer typically stems from a view point of how good of a deal did you purchase, but what I am looking more for is what do you think is the most hands off, but best performing assets in your real estate portfolio.

The apartment units I do have perform well, but I would consider them very high on the maintenance list and constant interaction with renters.  I have been considering switching up my portfolio to long term commercial leases, or renting shop space (commercial leases.

With so many options out there I was wondering what some of your best headache free real estate investments have been: some examples could be storage units, multifamily rentals, commercial buildings with long term leases, etc.

Does the property have a zoning designation?  A lot of Houston did not have zoning regulations.  If you build industrial, I would build one building with the option to split the space if need be.

Mark

Great suggestion! Have been doing mainly retail; and in my experience is that bigger Units go very slowly. Guess it is the same with industrial. Thanks!