Terms like Gross Rent, Net Rent, Effective Rent or Face Rent get thrown around in conversations with tenants, but not everybody knows the meaning of each term. If the annual “NNN” expenses (operating expenses) are $9.50 SF/YR, then your total “gross” rent would be $30.00 SF/YR. I help them take advantage of their real estate needs to achieve their business or personal goals. It assumes that your rental property will be rented every day of the year and that renters will pay the agreed to rent documented in the lease. This term is used interchangeably with ASKING RENT or FACE RATE. Let me break it down for you in simple terms and then advise you as to which one is most important to you as a tenant when you are considering lease alternatives.FACE RENT: The quoted base rental rate before taking into account any rent increases or incentives. Face Rent may or may not include building expenses, depending on if the rent is quoted as “Gross” or “Net”.GROSS RENT: The rent calculated inclusive of all building costs (i.e., property insurance, taxes, common area maintenance expenses, etc. This is another term that could have numerous interpretations so we’ll present the one we find most common in our market.
My background in economic development, combined with the Colliers process and platform, give me a unique perspective and experience that I use to meet my clients' commercial real estate needs. A double net lease makes the tenant responsible for both property taxes and insurance premiums due. Effective gross income (EGI) is the Potential Gross Rental Income plus other income minus vacancy and credit costs of a rental property. The gross income multiplier is obtained by dividing the property's sale price by its gross annual rental income, and is used in valuing commercial real estates, such as shopping centers and apartment complexes. Key Takeaways Effective gross income is calculated by adding the potential gross rental income with other income and subtracting... EGI is key in determining the value of a rental property and the true positive cash flow it can produce. Vacancy costs are the periods between tenants where the owner is not receiving rent because there is a “vacancy.” As with vacancy costs, this amount will be an estimate that may be based on historical data.
Gross potential rental income is the hypothetical amount an investor would receive without any of the rental headwinds that are commonplace in the real world. It means an apartment that’s advertised with a net effective rent of $3,300 may actually have a lease that says it is $3,600, with one month free on a 12-month lease. Effective Rent is not the only thing to consider when comparing leases, but it’s a good way for you to do an apples-to-apples comparison when evaluating offers with varying lease rates, expenses and concessions.When you are considering an industrial or office lease (new lease or renewal), it is important that your real estate advisor conducts a financial analysis to compare the Effective Rent for each of your building options. A percentage lease requires tenants to contribute a portion of their revenue from the rented premises to the landlord in addition to base rent. That is an important first step (but not the only one) in determining which option is best for you. Gross operating income, sometimes also referred to as effective gross income, is the actual rent amount you are collecting from occupied units. Using the previous example, if the tenant pays $10.00 / square foot for 10,000 square foot building on a 5 year term, it would pay … effective gross rent (EGR) Definition The net rent that is generated after adjusting for tenant improvements and other capital costs , lease commissions and other sales expenses . Those of us in the commercial real estate industry sometimes use commercial real estate jargon and expect everyone around us to understand what we’re saying.