What kind of Lease do I have?
by Neil Dailey, The Baskin Real Estate Specialists

Often I get questions from clients asking about specific commercial lease questions and it leads us to a complete review of the lease or rental agreement with their Landlord. There are several terms that are frequently used incorrectly and generally lead to large misunderstandings when discussing or negotiating. It happened again this week when speaking with a long time client and so I thought I would dedicate my column this month to spelling out the basics.
A wide range of commercial leasing possibilities exist. Typically, an office lease in a major city and a retail lease in a suburban shopping center will be considerably different.
From a broad perspective, there are a few types of leases commonly found. Within these categories, leases may vary considerably.
• Gross lease: The tenant pays a set amount of rent and the landlord is responsible for payment of taxes, insurance and other costs associated with owning the property. (This is most commonly seen in office buildings. The tenant will pay a negotiated amount and the Landlord will pay the expenses for the building. If there is a shortfall or surplus in the annual expenses in the building, the Landlord will generally reconcile the difference at year end and allow a credit or bill for the repayment of the deficiency within a certain number of days.)

• Net lease: The tenant pays the rent plus a portion of the maintenance fees, insurance premiums and other operating expenses. (This is most commonly seen in small to mid-sized retail leases where all the tenants share in the common area expenses such as lighting, parking facilities, landscaping, etc.)

• Triple-net lease: Typically, for a freestanding facility, this type of lease has the tenant paying for all fees and operating expenses associated with the space. (“Triple Net” meaning: The Landlord/Owner is Net of taxes, Net of insurance and Net of maintenance expenses and responsibilities. These costs and responsibilities are passed on to the Tenant. In other words, the Tenant pays ALL expenses. If the roof leaks, don’t call the owner, call a roofer. If the toilet leaks, don’t call the owner, call a plumber. These type of leases are most common in stand-alone retail buildings as small as a bank branch location or fast food restaurants and as large as Home Depot’s or Ultimate Electronics facilities which are owned by an entity and leased back to a national tenant.)

• Shopping center leases: The tenant pays a base rate in conjunction with the square footage of the retail facility. Typically, the tenant will also pay some common charges and frequently a certain percentage of the gross sales. The tenant may also be assessed part of the property taxes. A shopping mall lease will often include terms about signage, hours of operations, common areas and deliveries. The landlord may also have the right to relocate the tenant. (These leases are common with indoor mall tenants such as The Gap, Abercrombie & Fitch Co., Finish Line, etc. Generally the Landlord will retain a lot of remedies to use in negotiating tenant needs, expansions, relocations, gross sales quotas, etc. that are used to ensure they can maintain favorable tenants or dismiss unpopular ones and also maximize the mall space to generate the most rental income.)

• Land or ground lease: The tenant leases the grounds and builds on the property. Typically, with a land or ground lease, all improvements on the property, including any building or buildings revert back to the landowner at the end of the lease period. (These leases are generally in the 30-99 year range and may have renewal options to allow for continued business. They are almost always accompanied by stringent guidelines, that if not followed, would cause the lease to end prematurely and the building to come back under the Landlord’s ownership.)
There are numerous variations on common lease forms so be sure to talk with a Baskin Real Estate Specialist before signing your next lease or renewal option 918-258-2600.

Make Real Estate Part of Your Retirement Plan

401K’s, Roth Ira’s, Stocks, bonds and annuities get plenty of attention when it comes to retirement planning but real estate may be one of the strongest vehicles you have to reach your goals. The obvious returns on real estate are appreciation, equity through debt reduction and tax credits but consider the following unique properties of real estate investment:

You can use other people’s money to invest. Unlike securities, investors can use someone else’s money to buy property. Why is that? Real estate has a more stable value than paper investments.
You use other people’s money to service debt. Yes, there is debt to pay for the money you borrowed and it is paid for by someone else- your tenant!
Profit from your total purchase, not just the amount you put down. The average increase in property value is only 5% in Tulsa so is that what you should expect as a return, right? NO! The beauty of borrowing money for real estate is that a $100,000 property purchased with 10% of your own money ($10,000) which appreciates in value to only $105,000 in one year produces a return of $5,000 on a small $10,000 investment. That’s a 50% return!

Real estate does have downsides. The beauty of downsides is that you can profit from someone else’s failure to plan for them. Expecting to always have income or failing to plan for maintenance and repairs will put an unskilled real estate investor behind the 8-ball. That seems to be the most common mistake; getting used to rent checks showing up and spending the money as it accumulates. The most powerful investors are not counting on 100% occupancy for the success of their building. Additionally, a savvy investor understands that as the economy changes, their income will decline or increase. Therefore, a bit of planning and research will make the difference between success and failure.

It is obvious why a strong investment analysis includes real estate. Visit www.tulsahousehunter.com for a look at all properties listed for sale in the Tulsa metro area and don’t overlook the power of borrowed money and how you can use it to reach your investment goals. Consult a seasoned real estate professional who fully understands your needs as an investor and begin accumulating retirement wealth today.

Chicago
October, 2006

Tulsa is represented at the annual luxury Real Estate Conference held this year in Chicago, Illinois by Tulsa real estate broker, Darryl Baskin. The Annual Luxury Real Estate Conference focuses on the latest developments in luxury real estate across the globe. In addition to the United States, other representatives attended from Canada, Greece, the Bahamas and Thailand.

The story seemed repetitive, Baskin says, “There has been a noticeable slowdown among luxury real estate brokers in most parts of the country. This is much of what we hear in Tulsa when national news reports ‘the real estate bubble’ and a ‘slowdown in housing’. It is refreshing to report Tulsa’s status as solid, consistent and less affected by national trends. While we don’t experience the incredible appreciation, we are often not affected by the sudden downturns and significant depreciations seen across the country, “Baskin adds.

While in Chicago, Baskin previewed the newest development from The Ritz Carlton Residences in which will feature properties expected to sell above $1,000 per square foot and other luxury properties in downtown Chicago. New York property values have hit as high as $4,000 per square foot for luxury penthouses in New York City according to Frederick Peters of Warburg Realty. Tulsa’s highest prices per square foot top out at $400. Oklahoma luxury property can be found here.

Representing such an affordable luxury market is a pretty easy task when you can report to your national peers that similar properties in Tulsa can be purchased for more than half the price of competing markets. When asked about missing the ocean, mountains and ski slopes, Baskin remarked “Green Country offers some fantastic settings. Besides, for the amount of money Tulsan’s save in housing, they can afford to travel anywhere in the world several times a year or, like many Tulsan’s, own second homes in a place of their choosing. That’s the kind of luxury you don’t tire of.”

For additional information, contact Darryl Baskin at 918-740-0077

Glenn Beck Visits Tulsa

As talk radio junkies ourselves, we love the entertainment of Glenn Beck and his political humor. It puts a light spin on serious matters but you stay up on events. We always try to sponser Glenn Beck events when he is in town.

Glenn Beck, Teresa Baskin amd Darryl Baskin at the Glenn Beck tour stop at the Mabee Center.

Is Tulsa Shrinking?

Is Tulsa Shrinking?

By Darryl Baskin

 

Census data indicates an exodus from the city of Tulsa to the tune of approximately 10,000 people while surrounding communities of Bixby, Broken Arrow, Jenks and Owasso make headlines for per-capita growth. How has this impacted the real estate market? Interestingly, a supply and demand comparison using active and pending home sales between Tulsa and surrounding communities shows demand for Tulsa homes remaining high - higher, in fact, than Jenks and Bixby if compared by school district.  What would cause this?

 

Census figures reflect the past while pending real estate sales indicate the present.  Late 2001 marked a significant downturn for Tulsa’s real estate market for various reasons; including several major corporate reductions and relocations.  The current census numbers available reflect this turmoil of the past few years.

 

It is also important to note that data cited between different reports will mix school district boundaries with city limits.  Tulsa numbers may or may not include Union and Jenks school districts which will often skew perspectives.  Suburbs are experiencing growth in impressive numbers.  Bixby, Owasso and Jenks are growing at approximately 39%, 28% and 37% respectively.

 

Jenks and Bixby’s growth put the two cities at a disadvantage under this type of comparison for the simple reason that a growing city keeps up with growth by building houses. When homes stop selling for even a short time, inventory piles up quickly.  This is why carefully watching the supply and demand in communities and neighborhoods is critical expertise for a real estate professional.  These “extra inventory” homes become competition for you as a home seller when demand lags.

 

These trends have an impact on your real estate value.  As buyers move to school districts of choice and as builders adjust to changing demands, supply of housing will determine what home sellers see on their bottom line at closing.  A clear understanding of absorption rate and buyer trends can protect your profit when selling. Always make sure your real estate broker has the skill to put this kind of information to work for you in your home sale.

 

Census data source: ok.gov

Housing statistics source: Tulsa MLS

Graph Caption:

The ratio of homes available to the number of sales pending show Tulsa holding strong at 3:1despite census data indicating a drop in residents.

Can your Landlord stop you? COMMERCIAL real estate

Can your Landlord stop you from opening another business?

 

He sure can. If your lease contains a “radius restriction” or a “non-complete clause”, that Landlord can hold you in default of your current lease if you open up another business too close to your existing one.

 

These clauses, along with several others, appear to be common terms and often overlooked in retail leases today. With the explosion of strip malls and nation-wide companies filling these centers, the Landlord’s realize that if one business is too close to another, it will divide the traffic from his space and his building will appear less popular. Which in turn, decreases the amount of rent he can demand, because he doesn’t have the proven traffic. Therefore, Landlords have installed these radius and non-compete clauses into their leases to maintain the popularity and rental rates at his center. These clauses are especially important to the Landlord if he is getting a percentage of the sales profits from that Tenant as rent.

 

It is extremely important for you to review your lease with a professional for explanations of terms and advice on how to negotiate that lease. The Landlord will generally always have the Lease structured to his/her benefit, but hey, they own the building and are afforded that luxury. Remember, in most cases, the Tenant has the ability to negotiate terms of the lease with the Landlord in order to come to a more bilateral agreement.

 

Posted by:

Neil Dailey

The Baskin Real Estate Specialists

918-258-2600

Getting through the foreclosure process

Could it be that more than 50 percent of all people in foreclosure loose their investment because they can not utilize the mortgage banks phone system? When we are working with a home owner in foreclosure or bankruptcy to sell a piece of property we first begin by evaluating the phone system. If you are delinquent and behind in payments your account number can be flagged for collections. Like most automated systems you are requested to enter in personal information which will usually include your account number and or social security number, this is to route your call to the appropriate ( or sometimes not so appropriate) department. Mortgage companies have two different departments with two specific responsibilities regarding your loan, Loss Mitigations and Credit & Collections. Once you have reached the collections department typically you are not going to get an opportunity to negotiate your situation ending with a favorable out come. However, if you hold out for a live person with out revealing your personal information and request the Loss Mitigations Department, you have a chance to speak with some one who's job is to negotiate with you the terms and arrangements of your loan and explorer a the possibility for grievance or grace period. This should establish an avenue to salvage your loan and avoid a foreclosure or bankruptcy on your credit report.

Amy J. Maples
Baskin Team Real Estate Specialist
918-260-5522 (Cell)
918-259-5804 (Direct)

Was 2005 Good to Your Home

Was 2005 Good to Your Home’s Value?

 

Why are so many Tulsa area homeowners smiling? Perhaps they’ve just seen the latest numbers for area home values.  The Tulsa metropolitan area has benefited from an increase in average home values of 5.5%.  While not the rate of some booming areas of the country, Tulsa’s 2005 rate of increase is 1.7% higher than any year since 2000.  This increase is a very normal rate of appreciation for the United States and is an indication of a healthy market for Tulsa.  The cumulative home appreciation since 2000 has been 13.5%.

 

Does this mean you should cash-out and move to a larger home?  Consider the investment side of the equation.  Waiting to buy a new home because you “have to have more money” for your present home simply means the home you plan to purchase will increase in value as well.  In a circumstance where you plan to “move up” to a larger home, waiting is detrimental.  It stands to reason that profiting from a 10% value increase on the $300,000 home you are planning to purchase ($30,000) is far better than a 10% increase on your present home of $150,000 (or $15,000).  Waiting to purchase a home in this instance costs you $15,000.

 

The best time to downsize, however, is when the real estate market is depreciating so that the biggest loss is on a smaller property.  Smart real estate investors use these cycles to buy and sell to work towards their real estate goals.  Individuals can smartly use the same cycles to gain greater wealth in their real estate holdings. The real trick is knowing which cycle you’re in and how long it will last.

 

Determining your home’s value is not as simple as adding a percentage to what you paid for it.  Wear and tear, style changes and trends in area values will cause tremendous swings in values.  Your primary concern should always be your competition.  What can a home buyer get for the same money you are asking for your home?  This simple question holds the secret to why some homes don’t sell and others fly off the market in a matter of hours.  Pricing is one of the critical phases which calls upon the expertise of your real estate professional.  “Removing the emotion from the decision is very important to determining the right price,” says Jerri Sell-McNair, Listing Partner for the Baskin Real Estate Specialists.  “Children have grown up in your home, family got married there, the wallpaper was a custom design – things home buyers won’t pay more for.  A good real estate professional will size up the competition and help a seller position their home at a price level that makes buyers WANT to buy it without leaving any money on the table.”

 

The statistical information referred to in this article is available by emailing info@darrylbaskin.com or calling 918-258-2600.

Jenks housing glut?

I was recently searching the Jenks, Oklahoma housing market to find that over 57 properties were available in the price range of $300,000-$350,000. While having some difficulty selling a property in this price range, I searched to find out why. There are plenty of homes to choose from. While other areas of the market have what almost seems to be a shortage, there are plenty to purchase in this segment. Great for home buyers who want to negotiate because they have others to choose but not great for home sellers who are looking to capture the interest of home buyers. This is not likely to last long as the spring market tends to bring out buyers and drop the available inventory.

The Numbers will undoubtedly reflect a great year for the Tulsa real estate market. While year end numbers are not yet available for 2005, there has been significant improvement from 2004. The primary improvement has been the ratio of sales for the available inventory. Sales have increased fast than the increase in inventory - resulting in a gradual reduction in the number of homes available for purchase. This is better for sellers but not a terrible loss for buyers. The market for Tulsa could best be summed up as "fair" for consumers. Both sides are getting what they were after in their home sale and purchase.

Searching the housing market around Tulsa, Oklahoma is simple. Visit www.tulsahousehunter.com to browse the MLS and have new homes for sale in the Tulsa area emailed to you as they hit the market.