Doing Investments The Right Way

Some Things You Should Know About Investment Grade Tenants

If you own a property and offer it for rent, then you should consider seeking investment grade tenants. Landlords get to benefit from investment grade tenants because they offer a lot of financing options.

Investment grade tenants come in the form of companies that carry with them an investment grade rating that is given by any rating agency. Lenders typically provide financial assistance to tenants depending on their landlord’s credit or the value of the real-estate, but when it comes to credit tenants, everything now depends on the tenant himself as well as the value of the lease payments he will be making in the following months.

So, what is investment grade rating?

Investment grade ratings are the basis of credit tenant lenders to secure loans for the tenant as well as sell them to investors. Getting a minimum rating of BBB- is what investment grade is all about. 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 participating in this credit tenant financing industry.

So, how do you get 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. 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.

How do you transact sale leasebacks?
When credit tenants get themselves involved in sale leaseback transactions, they can immediately do direct financing. 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.

What are credit tenant lease terms?

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. Most credit tenant leases have three net terms. This simply means that credit tenants should shoulder whatever insurance, maintenance costs, and taxes they must pay. The loan terms should be based upon the entire lease duration. All of these obligations greatly rely upon the tenant, meaning this burden is no longer a responsibility of the landlord. On the part of both the investor and the landlord, credit tenant lease terms have the same function as that of a corporate bond. This means that all they have to do during the real estate project duration is collect checks as well as not actively get themselves involved.