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 F.A.Q

 

 

+ Why purchase a free standing NNN property for investment?
+ How safe are the NNN single tenant free standing property investments?
+ Whats the difference between Double Net (NN) Lease and Triple Net (NNN) Lease properties?
+ What states don't have state income taxes on investment properties?
+ What kind of Cash on Cash Return can I expect if I decide to purchase through NNN DEALS?
+ What kind of Single Tenant properties and Leases can I expect if I decide to purchase through NNN DEALS?
+ What should I know about 1031 Exchange?
+ Is it safe to invest in a ground leased property?
+ What’s the difference between Subordinated and Unsubordinated Ground Leases?
+ What is CPI and How to calculate CPI Change on lease options?
+ What is Percentage Rent and How to calculate Percentage Rent?
+ What is Cash on Cash Return on Investment and How to calculate it?
+ Based on what factors NNN properties are priced?
+ What's the difference between Tenant in Common (TIC) and Joint Tenancy?
+ Why purchase NNN properties by Tenant in Common (TIC)?
+ What is a Zero Cash Flow Deal?


Why purchase a free standing NNN property for investment?

Free standing NNN properties are great investments because they are typically management-free, and the leases are often signed by credit tenants. 

 

How safe are the NNN single tenant free standing property investments?

Single Tenant Free standing properties are considered by many to be one of the least risky of all real estate investments (Single tenant > Industrial >  Office > Shopping centers>  Apartment Buildings > land) . Because they do not involve tenant turn-over and if the tenant is considered "investment grade", the risk is substantially mitigated. 

 

What's the difference between Double Net (NN) Lease and Triple Net (NNN) Lease properties?

In Double Net (NN) Leased properties landlord or the owner is responsible for the building roof and structural integrity. In Triple Net Leased properties, landlord or the owner has zero (0) responsibilities.  Tenant is responsible for all operating expenses, real estate taxes and the building roof and structural integrity.

 

What states don't have state income taxes on investment properties?

The following 9 states have no state income taxes : Alaska, Florida, Nevada, Texas, South Dakota, Washington, Wyoming, Tenessee and New Hampshire. Please consult with your tax advisor.  New Hampshire and Tennessee tax dividend income at varying rates.

 

What kind of Cash on Cash Return can I expect if I decide to purchase through Triple Net Investment Group?

On average our clients have been able to achieve 8% cash on cash return on their investment. Cash-on-cash return is the annual return you make on the property in relation to the down payment. For example If you invest $300k to buy a $1m single tenant nnn property and you make $30k after all expenses (mortgage payments and any property expenses, $0 for single tenant). You have cash on cash return of 10%, not bad.

 

What kind of Single Tenant properties and Leases can I expect if I decide to purchase through NNN DEALS?

You can expect investment grade NNN stable signle tenant properties with long term leases (average 10 years)  such as: Walgreens, Wendy's, Arby's, Best Buy, Office Depot, 7- Eleven, CVS, Rite Aid, Kindercare, Jiffy Lube, Chili's, Wachovia Bank, Applebee's Wal-Mart, Ruby Tuesday, Dollar General, Burger King, KFC, Popeye's, McDonald, Taco Bell, PetSmart, Pizza Hut, Pep Boys, Olive Garden, Target, Starbucks, Kmart, etc. 

 

What should I know about 1031 Exchange?

A) Exchanger must initiate the 1031 process before the closing
B) Exchanger has 45 days from the date of the sale to identify potential replacement  properties and a total of 180 days from the original sale date to purchase the replacement properties.
C) Exchanger must acquire replacement property of equal or greater value, obtain equal or greater debt on the replacement property, reinvest all the net proceeds realized from the sale of the relinquished property, and acquire only like-kind  property. D) Exchanger must own the investment property for at least one year before he can use it for 1031 Exchange.
E) Exchanger may use the vacation house or primary residence for 1031 exchange as long as the property is reported as a rental or business use on the tax returns for two consecutive years.
 Visit 1031 Exchange Page for more information.

 

Is it safe to invest in a ground leased property?

Investing in ground lease is very safe because the buyer owns the land for ever. Ground Lease is described as a long-term lease of the land. After the lease expires, the land with all the improvements, buildings and other structures will be restored to the owner. A ground lease arrangement with a sophisticated tenant can result in development of the land in such a way as to maximize its potential and provide the landlord with a stream of rental income. Landlord may benefit from the anticipated appreciation in the land after the tenant builds improvements on the land. Since the landlord maintains ownership of the land, the landlord can pass on the appreciated value of the land to his estate or his heirs at his death.

 

What is CPI and How to calculate CPI Change on lease options?

A consumer price index (CPI) measures changes in the price level of consumer goods and services purchased by households. The CPI is defined by the United States Bureau of Labor Statistics as "a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services."[1] 

CPI Changed from  172.2 in year 2000 to 218.0 in year 2010. 

CPI= ( Updated Cost/ Base Period Cost) *100=  ( 218.0 /172.2) *100 = 126.59

  
Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
ANN  172.2
172.2
179.88 183.96 188.9 195.3 201.6 207.34 215.30 214.53 218.05


What is Percentage Rent and How to calculate Percentage Rent?

A Percentage Rent typically requires a tenant to pay "Base Rent" and then on top
of that amount, the tenant also pays a percentage based on Annual sales volumes.
Percentage leases are commonly executed in retail mall outlets and other commercial retail leases.

Example: If store sales is $1m and base rent is $30,000.00 a year at 5% Rent the
tenant is expected to pay $20,000.00 a year percentage Rent.


1m* 5%= $50,000.00 - $30,000.00= $20,000.00 or

$30,000.00/5%=$600,000.00 Break Even Point
$1,000,000.00- $600,000.00= $400,000.00 * 5%= $20,000.00


What is Cash on Cash Return on Investment and How to calculate it?


In investing, the cash-on-cash return is the ratio of annual before-tax cash flow to
the total amount of cash invested, expressed as a percentage.

Cash on Cash Return= Annual Cash Flow/ Total Cash invested.

If you invest $200,000.00 in a deal and you get $20,000.00 a year return after all
expenses. The cash on cash return on investment will be at 10%.



Based on what factors NNN properties are priced?


There are few main factors in pricing NNN properties.
A) The financial strength of the guarantor of the lease
B) The specific location of the property under consideration
C) The remaining length of the lease term and the periodic increases in the lease
D) The financial performance of the specific property under consideration

 

What's the difference between Tenant in Common (TIC) and Joint Tenancy?

Tenants in common (TIC)  refers to arrangements under which two or more people co-own a parcel of real estate without a “right of survivorship”. This type of co-ownership allows each co-owner to choose who will inherit his/her ownership interest upon death. By contrast, the Joint Tenancy requires that each co-owner’s interest pass to the other co-owners upon death.

 

Why purchase NNN properties by Tenant in Common (TIC)?

Tenants-In-Common (TIC) has various features that make it attractive to real estate investors.

Tenants-In-Common (TIC) has various features that make it attractive to real estate investors.
A) With (TIC) You are purchasing an undivided percentage interest in a larger investment real estate project than you might be able to purchase by yourself.
B) You can buy buildings with credit tenants who have long-term leases.
C) Non-recourse financing, generally in place.
D)  Access to higher grade investment properties
E) Property Management Teams are already in place with TIC ownership
F) Diversification strategies
G) Low minimum ownership amounts

  

What’s the difference between Subordinated and Unsubordinated Ground Leases?

 

In Subordinated ground lease, lien is placed against the fee simple title to the land. In

unsubordinated ground lease, no lien is placed against the fee simple title to the land, the leasehold estate is the primary security for the loan.  

 

 

What is a Zero Cash Flow Deal?

 

A Zero Cash Flow Deal is a highly financed deal and all of the rental income of the investment grade rated credit (AAA to BBB+) property goes to the institutional lender to pay off the loan. In zero cash follow deal, investor has to pay taxes on rental income that the individuals have not actually received at the time during which the taxes are due “Phantom income”. Zero Cash Follow Deal is good for investors who wish to either complete an IRC 1031/1033 or the investors who wish to achieve a more effective “tax profile” to offset current passive income liabilities.


 

  


Please E-mail us if you are buying or selling a NNN leased property.
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