CRE 101: Commercial Real Estate Investing

Calculate usable and rentable square footage; apply the load factor to the rent rule; and note cubic volume does not count toward leasable square feet.

Learn how gross leases, or full service leases, quote a single rate covering base rent and all operating expenses per square foot, with annual escalations.

Explain how a triple net lease separates base rent from operating expenses, including real estate taxes, building insurance, debt service, and passthroughs, with annual escalations and pro rata shares.

Examine how percentage leases add a percentage rent to base rent in retail properties. Analyze statements of sales, audits, and the impact on net operating income and property value.

A modified gross lease blends gross and net, with expenses in base rent and rest added; expenses outside base rent are reconciled annually to actual costs for any property type.

Engage in a lease negotiation exercise within the realm of commercial real estate investing, applying core negotiation concepts to optimize terms and outcomes.

Negotiate expense caps in a triple net lease to cap increases, using pass-through rates and 3 to 5 percent, and shift to modified gross lease to prevent 100% tenant reimbursement.

Explain capital expenses as improvements extending a building’s life, including common areas or the interior of a tenant space; show broker commissions capitalized on straight-line over the lease term.

Understand gross potential rent as adjusted, the lease controls reimbursements, pro rata shares, expense caps, and tenant audit rights, while distinguishing capital from operating expenses and noting depreciable capital improvements.

Bridge loans fund value-add projects by financing renovations and potential rent increases, with private equity backing on the debt side and short-term, higher rates.

Explore grants and tax credits for affordable housing, including 9% and 4% low-income housing tax credits, funding 70% and 30% of the capital stack, with HOME, CBD, and SBA loans.

Engage in a development project exercise within CRE 101 to explore key concepts in commercial real estate investing.