The oral Torah is comprised of the Talmud, a collection of Hebrew texts. The
popularly cited Babylonian Talmud dates to about 500 CE. The two
components that make up the Talmud are the original source (Mishnah), and
the Gemara (includes elucidations on the Mishnah).

There are many translations that mention the Talmudic principles of real
estate investing. In one, Rabbi Yitzak wrote, “A person should always divide
his money into thirds: one third in land, one third in trade, and one third in
hand”. In another, the same Rabbi Yitzak further instructed: A person should
always have his money at hand, as it is instructed. And hold fast to this
money in your hand”

Beyond these proclamations, the Talmud unequivocally mentions
diversification as a key strategy to mitigate and manage risk. Acolytes learns
this principle modeled by their leader Jacuv, who when threatened with
attack divided his family caravan into two clusters. The text declares, “Jacuv
divided the family and the herds into two camps”, and Jacuv said, “If Aesop
attacks one camp, the second camp will flee and remain intact”.

In present times, when purchased free of debt, NNN real estate remains a
steady growth engine. The reason triple net real estate is considered risky is
because many investors will use massive amounts of debt to generate
excessively high IRRs. However, leveraged, risky, property portfolios do not
satisfy the Talmud’s recommendation for financial resilience.

The land or real estate section of the Talmudic portfolio is about building on
a non-leveraged, solid, stable, financial core. Keeping a constant chunk of a
portfolio in this “risk-capped” (net lease) NNN category provides the stability
required for undertaking significant risk with the rest of the portfolio. Whilst
this first 33% provides a resilient, steady value, the net lease investor is
further tasked with committing talent and the next 33% of resources, to a
business. But unlike long term U.S. stock market returns, which average just
8 -10% CAGR, business or trade in Talmudic times offered the risk and
potential for 100-500% CAGR. But these kind of buy low, sell high,
opportunistic, businesses require high levels of cash in reserve (or, at least
another 33% in available cash) – the third leg of the Talmudic investing
stool.

Asymmetrical investing provides the opportunity for elevated return but
absent devastating risk. In Talmudic times, losing one’s assets meant
complete annihilation. And even today, heavily leveraged NNN net lease real
estate investors face total destruction in many scenarios. The Talmud guides
triple net lease investors to creatively mitigate high risk/high return
opportunities with the requirement of building inter-generational wealth.
Triple net investors well understand that the avoidance of all risk can
imply significant paucity in income and asset growth, a very undesirable
option for investor generations.

A true Talmudic portfolio can we well represented by a bar-bell type of
balance between future and present property reward-risk outcomes. And
famed present day, NNN real estate investors who use asymmetric, barbell
approaches to building real estate portfolios, are following a tried and tested
strategy from ancient times.

At the Triple Net Investment Group, we respect and strongly believe in the
investing traditions of our net lease clients. We believe that even today, the
Talmud’s principles apply and give highly profitable and resilient guidance to
NNN investors. Talk to us and find out how we can fine tune your NNN
investment opportunities to greater success.