When inflation rates started rising in April 2022, consumers worldwide felt the impact of increased energy, goods, and service costs. As it stands, the U.S. faces one of the highest inflation rates in decades.
When price fluctuations begin to affect our daily lives, informing yourself about potential alternative income sources can have a huge impact on financial security. Plus, knowing simple investment concepts like net leases, interest rates, and pricing resets can help you make educated decisions on which investment methods and timing are right for you.
In this blog, we’ll break down everything you need to know about net-lease retail, interest rates, and pricing resets, plus, how Brisky can help find the right CRE investment for you and your finances.
What Is a Net Lease?
The term “net lease” describes a rental arrangement where a tenant is responsible for expenses other than just the monthly rent, like property taxes, insurance premiums, and routine maintenance. Net leases are extremely common in commercial real estate, and one of the most favorable to investors.
The Basics of Net Leases
In order to fully comply with a net lease’s terms, the renter is responsible for all property-related costs, just as if they were the owner.
Utilities, maintenance, repair charges, and other operational expenditures may be included in the agreement. Since net leases incur more expenses, most landlords are willing to take lower monthly payments for this type of lease.
If you’re the property owner or landlord, you don’t have to worry about most operations-related monetary responsibilities. On the other hand, tenants can negotiate lower lease rates in exchange for other expenses they take on from the property owner.
Why Should We Care About Interest Rates?
Interest is the cost associated with borrowing money and one of the most important aspects of the American economic system.
Interest rates influence the cost of borrowing, cost of goods, the return on savings, and are a large part of the total return of most investments. Certain interest rates can also provide insight into future economic and financial market activity.
How do Interest Rates Work?
Interest rates are applicable to the vast majority of financial dealings. Borrowers pay interest as a fee for the use of money from a lender or for delayed payments for a debt. The interest amount depends on the agreed rate, which is why interest rates are sometimes called the “cost of money.” Depending on the interest rate, borrowing the same amount of money can be more or less expensive for the loanee.
In the case of loans, interest is calculated by multiplying the principal by the applicable interest rate.
How Are Interest Rates Determined?
Interest rates are influenced by several factors, including the economy’s health and the supply and demand for loans and credit.
Central banks will raise or lower short-term interest rates to ensure stability and liquidity in the economy, while long-term interest rates are affected by the demand for 10- and 30-year U.S. Treasury notes.
When the government raises interest rates, it increases the cost of borrowing money. As a result, consumers have less disposable income to put toward discretionary purchases when interest rates are high. When interest rates are low, both consumers and businesses benefit from the increased borrowing and spending.
What Is a Reset Rate?
Interest on the principle of a variable-rate loan is calculated on the loan reset date at a rate known as the “reset rate.” The loan terms, including the reset conditions and interest rate computations, should be clearly laid out in the credit agreement between the lender and the borrower.
Any loan with a varying interest rate can have a reset rate attached to it. When the underlying benchmark interest rate or index changes, the loan’s interest rate will also vary, making it a variable-rate loan.
Investment Services You Need
Our goal at Brisky Net Lease is to be your one-stop shop for all things related to NNN investment properties. We know our way around the national NNN investment environment and can help you find the perfect property for your next commercial real estate investment.
We put a lot of time and effort into underwriting, property evaluation, and education, keeping our clients informed and in tune throughout their investment journey.
To learn more about the various CRE investment services we offer, get in touch with our team!