Sunday, December 30th, 2018 December30th2018

Sell for More Trivia: What is Net Effective Rent?

Published on December 30th, 2018

Sell for More Trivia is a weekly blog series that playfully presents a trivia question about commercial real estate.

 

From a landlord’s perspective, net effective rent is the gross amount of rent payable by a tenant less any costs incurred by the landlord in order to lease the space to the tenant.

Landlord costs typically include:

  • Leasing commissions
  • Construction costs for tenant improvements
  • Free rent periods

The difference between what is owed by the tenant and these upfront costs is the amount that the landlord has available to pay its mortgage, building operating expenses, accrue reserves for capital improvements, and generate a return on the real estate investment.

Generally, net effective rent will be presented on a square foot per year basis.

Clearly, the idea here is to understand how much rent is actually being received after factoring in those upfront expenses which can be substantial.

 


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About Beau Beach, CCIM

Beau is a tenacious Commercial Real Estate Broker, author and adoring father of four. His clients appreciate his no-nonsense demeanor and his legendary work ethic.

Beau leads Prowess IRES which is a commercial real estate broker for sellers in the Nashville, Milwaukee, South Florida and Chicago markets.

He’s the author of the books The 3 Reasons: Why Most Commercial Properties Don’t Sell and True Wealth: What Every Seller Should Know About 1031 Exchanges.

Beau can be reached at 414.324.4938, 615.603.9770, click to schedule a call or Beau@ProwessIRES.com