Thursday, January 20, 2011

What's the Difference Between a Triple Net Lease and a Gross Lease?

The last two weeks I started looking at office spaces. So many variations in what an office space is! I just need a large room, big enough for a large table with eight chairs around it, a desk for myself with wifi and a bathroom. It's exhausting, I go in there with high hopes and my dreams are dashed when I see things I don't like. One ad boasted the space "has great lake views!" Who cares? The poorly laid out floor plan for the square footage was sad for my usage. I couldn't put more than one person in one room. The realtor wanted me to "bust out a wall" at my expense to make the rooms more user friendly. And a vanity with a sink in the middle of a small room with awful heating boxes on the wall, which took up more valuable real estate (who's going to sit there??) Uh, no thanks.

I go see another space that is going under a renovation, freshly painted walls and the carpet was ripped up leaving plywood. Would I want to put down flooring again, at my expense. Uh, no thanks. How about pay for all the electric and electric heat for the entire second floor since I would be the only tenant there until more renters come in. Uh, no thanks. 6% of the school taxes? Village and county taxes? Variable sewage and water costs? Waste removal? Parking fee? $1,000,000 insurance coverage? and do that for 10 years please? Uh, no thanks. What I thought was a nice little rent of $1025.00 turned into about $1,500 pretty quick. And we know how taxes go: UP. Could I keep up with that pace or keep the business in my kitchen and double up on my own mortgage? Tough choices! I really want to get it out of here though....

I just explained Triple Net Lease. It's set up more for the investors, buying the property, making money from the rent and getting the renters to foot the bills to cover expenses. It could work to your advantage because you can negotiate a lower rent. I'm not ready for this sort of deal yet, that's for sure.

I need the Gross Lease. One price, everything covered by the landlord. Usually electricity is on you. But watch out if the heat is electric! Cable will be covered by you too. I'm looking at one that the landlord will give two months rent free for build out, which is renovation. The space may need painting or flooring and the landlord will let you do what you want but you pay for it. Luckily this space has new carpet and new paint. I'm not fussy about the paint and I will have to work with the carpet. With the jewelry assembly, lots of cut chain link pieces falling to the floor all day, bummer I can't just sweep it away. It's same floor too, another negotiable leg you can stand on. The triple net lease was one flight up. Dragging fifty pound boxes of stones and chains up one flight would mot be fun. Oh! I just found out the heat is included in the gross lease! All I have to pay is my own electric.

I'm waiting for the proposal from the gross lease landlord. This one is right down the road, a little more than a mile, I could ride my bicycle there! Fingers crossed the numbers are in my favor! I love the idea of keep this right in the neighborhood, right down the road.

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