Website design By BotEap.comCommercial real estate investing is new territory for many real estate investors. The following is the alphabetical list of the most used terms in this area.

Website design By BotEap.comTethered tenants: National tenants of big brands eg Albertsons, Longs Drug, Walmart that bring a lot of traffic to the mall.

Website design By BotEap.comCAM: Maintenance of common areas. Associated with CAM are the CAM fees. For NNN leases, the term CAM fees refers to the money tenants pay the landlord to cover property taxes, insurance, and maintenance.

Website design By BotEap.comCapitalization rate: Return on investment in the first year of ownership. The capitalization rate is the ratio of the first year’s net operating income to the purchase price. The higher the capitalization rate, the higher the rental income. For people who invest in the stock market, the capitalization rate is the inverse of the P / E ratio.

Website design By BotEap.comCash in cash: Annual percentage return on your down payment not including appreciation. First year cash flow divided by your down payment.

Website design By BotEap.comDuct loan: Also called a commercial mortgage backed securities (CMBS) loan, often with a lower rate than the traditional commercial loan, but has a high prepayment penalty (called a cancellation or maintenance of performance penalty) or has no payment flexibility.

Website design By BotEap.comCPD: Car per day or volume of traffic on a highway.

Website design By BotEap.comCPI: Consumer’s price index. It is often used to calculate the annual rent increase to offset inflation.

Website design By BotEap.comDue diligence period: the duration after acceptance is normally 15-30 days to allow the buyer to investigate the property. The buyer can cancel the contract during this time for any reason and obtain a full refund of the deposit.

Website design By BotEap.comEstoppel Certificate: a letter provided and signed by the tenant confirming the current rental and terms.

Website design By BotEap.comFull service lease: Lease agreement in which the tenant pays a rent that covers everything, including utilities.

Website design By BotEap.comGross income: total annual income before any expenses.

Website design By BotEap.comGross lease: lease in which tenants only pay rent. The landlord pays taxes, insurance and maintenance.

Website design By BotEap.comGLA: Gross leasable area or total profitable area. This is the space that can be rented and receive rental income. It does not include spaces for a utility room, elevator, etc.

Website design By BotEap.comGRM: The gross rent is multiplied per apartment. Relationship between purchase price and annual income.

Website design By BotEap.comLLC: Limited Liability Company. A legal entity that many investors formed to own commercial property.

Website design By BotEap.comLAW: Letter of Intent / Interest or the normally non-binding letter of offer that is used to make an offer to purchase a commercial property.

Website design By BotEap.comMAY Appraiser: Commercial appraiser member of the Appraisal Institute.

Website design By BotEap.comMain lease: Lease agreement signed by seller to rent vacant space to provide rental guarantee.

Website design By BotEap.comMixed use: Commercial properties with commercial premises on the 1st floor and apartment on the upper floors.

Website design By BotEap.comTriple Net Lease (NNN): Lease agreement in which tenants pay the basic rent plus property tax, insurance, and CAM fees. NNN’s absolute lease is an NNN lease in which tenants also pay the property management fee.

Website design By BotEap.comNOT ME: The operating margin. Annual income after all expenses (property taxes, ins. & Maintenance) except mortgage payment.

Website design By BotEap.comPad: Independent building in a prime location of a large shopping center.

Website design By BotEap.comGo Trought: see refund.

Website design By BotEap.comLease percentage: Lease agreement in which the tenant’s country bases the rent plus a percentage of the tenant’s income.

Website design By BotEap.comPostponement of Phase I: inspection report that provides an assessment of soil / environment contamination. Typically required by the lender as part of the commercial property loan approval process.

Website design By BotEap.comPostponement of Phase II: inspection report for investigation of subsoil soil and groundwater. This inspection is more extensive, which involves testing to see if there is any contamination of the soil and water.

Website design By BotEap.comProforma income: Potential income, that is, higher when the property is 100% leased.

Website design By BotEap.comPro forma capitalization rate: Potential capitalization rate assuming the property is 100% leased at the market rental price.

Website design By BotEap.comRefund: the portion of property taxes, insurance, and CAM fees that a tenant must pay to the landlord in addition to the base rent.

Website design By BotEap.comRental guarantee: rent paid by the seller to the buyer for the vacant spaces until they are leased.

Website design By BotEap.comSBA Loan: a government-guaranteed loan for owner-occupied properties.

Website design By BotEap.comSNDA: Subordination, Non-disturbance and Advocacy. It is an agreement required by the lender, signed by the tenants agreeing: the new link in 1st position; lender as lessor in the event of foreclosure; valid lease as long as the tenant is not in default.

Website design By BotEap.comTIC: Tenants in common. A way for small / self-directed IRA investors to own a fraction of high-value properties as joint tenants.