How are Triple Net Lease Properties Valued?

Triple Net Lease Properties typically are valued using their Capitalization Rate. Commonly referred to as Cap Rates they are a simple way to compare the value of a stream of economic benefits in a given property. This is computed as a pretax cap rate using the Triple Net Lease Properties Net Operating Income (NOI).

A property’s NOI is the property’s gross income less all expenses (except debt service). In absolute nnn properties, one of the premier examples of the Triple Net Lease Properties family, the annual rent is the same as the NOI. The Cap Rate is simply the NOI divided by the purchase price.

For example: if the purchase price is $2,000,000, and the NOI is $200,000 per year, then the cap rate is $200,000 divided by $2,000,000 = 10% Cap Rate.

Some of the considerations when determining what the cap rate ought to be on particular Triple Net Lease Properties:

• The credit worthiness of the tenant.
• The length of the lease of one of the Triple Net Lease Properties in question
• Type and frequency of increases in rent.
• Strength of the demographics of each location with nnn properties for sale
• Improvements built on the ground with nnn property. Finally are the improvements representative of a generic tenant with little specialization or are they special purpose that would require a large capital improvement expense and time to convert before re-tenanting?
• Condition and the age of the improvements with nnn investment properties
• Location, Location, Location of the Triple Net Lease Properties

The more positive the above factors are, the lower the Cap Rate, and the higher the value of the nnn leased properties. But if the above factors are weak, the Cap Rate will be higher, and the resulting value will be lower for the Triple Net Lease Properties.

Markets are not always what they seem to be and low cap rate Triple Net Lease Properties are not necessary a lower risk investment – they could simply be a bad investment that is over priced. Professional investors seek Triple Net Lease Properties that are priced in their favor, with a higher cap rate for a property that has low risk factors. Keep in mind there are many considerations in this specialized field of nnn properties to consider.

Types of Net Leases in the family of Triple Net Lease Properties

1. Absolute Triple Net (NNN): The tenant pays all operating expenses, including maintenance, repairs, taxes and replacement for the entire property, without limitation.
2. Triple Net Lease (NNN): Similar to absolute Triple Net Lease Properties, this lease may have additional owner responsibilities. The owner is generally liable for the structural components of the building such as the roof, foundation, load-bearing walls. Nnn lease properties will vary from transaction to transaction, so the actual lease on a property must be carefully read as part of the investment due diligence by a professional real estate attorney as well as the purchaser.
3. Other Net Leases (NNN): These are leases which provide that the tenant pays two, or one, of the net lease components such as (Taxes, Insurance, and Maintenance). So, for example, a double net lease might be one in which the tenant pays for taxes and insurance but not maintenance. It is necessary to review the actual language of the specific lease to determine who pays what. Now you see that it is very wise to understand the difference in the family of Triple Net Lease Properties and not get caught off guard with responsibilities or expense but simply hearing the words Triple Net Lease Properties.

Who Buys Triple Net Lease Properties?

Triple Net Lease Properties are appealing to those who wish to invest in commercial real estate investments with relatively low risk, solid long term income sheltered by depreciation, capital gains advantages and little to no management responsibility. The investor can sell-out, often with a profit, by listing the Triple Net Lease Properties on a national website like www.westwoodnetlease.com. The investor also can hold the property, allow it to further appreciate in market value, and lease it again at a higher rate to the original tenant or a new tenant when the lease term expires.

Summary of Investor Benefits of Triple Net Lease Properties and NNN properties

1. Security of both the credit tenant and the prime real estate.
2. Simple transaction with minimal costs.
3. A favorable cash return on a passive investment.
4. Property depreciation shelters a portion of the annual cash return from income taxes.
5. The value of most Triple Net Lease Properties appreciates during the term of the lease.
6. Minimal risk with investment grade tenants associated with Triple Net Lease Properties.
7. Opportunities for higher returns based on regional and national tenants.
8. Investor owns property with little to no on-site management responsibilities because of the structure of Triple Net Lease Properties.
9. Tenant pays property insurance, maintenance, improvements, and taxes on most Triple Net Lease Properties.

Triple Net Properties: Their appeal to the real estate investor for safety, return and quality are considered primary in one’s investment portfolio.

All forms of investment today are wise to consider in order to diversify one’s portfolio: Stocks, Bonds, Cds, Real Estate, Money Markets, Foreign Investments and gold to name a few. But Triple Net Properties must be at the top of everyone’s list for various reasons.

1. NNN properties require less hands-on responsibility to the investor in their active participation.
2. Strong credit tenants guaranteeing the Triple Net Properties leases and rent paid to the investor monthly.
3. Most responsibility for building and grounds in hands of tenant with nnn properties for sale.
4. Depreciation of the building for tax purposes and appealing possible appreciation of location are mainstays for Triple Net Properties.
5. Financing of transaction from a major bank easier and more reliable with Triple Net Properties.
6. Easier to sell than other real estate ventures.

Asset class selections from net properties vary and are diverse for Triple Net Properties nationwide.

Whether it is retail, office, medical, or industrial Triple Net Properties offer a lease for all categories. The price range varies with the income generated from the tenant leasing the property and can be normally in the range of 1 million to 20 million in scope and size. Cap rates which are basic returns on investment for the purchaser, range from 5.5 percent up to 10 percent depending on the risk reward tolerance level of each investor when pursing triple- net properties. The retail industry have clothing stores, auto parts, drug stores, fast foods, sit down restaurants just to name only a few. Office can consist of corporate headquarters for major companies that sign a long term lease creating Triple Net Properties for nnn investment properties. Top tier doctors and clinics along with surgery centers are primary Triple Net Properties ideal for the future of investors that are concerned with health and care for seniors. Industrial Triple Net Properties such as Fed X and Boeing that store packages and supplies in warehouses across the country make ideal nnn leased properties.

Www.westwoodnetlease.com, a major website that caters to investors whom desire Triple Net Properties will give guidance and find net properties throughout the country for prospective investors. The company educates and selects the appropriate property based on the risk/ reward tolerance level of each client and explains the good, bad and ugly of each type of property. The seller pays Westwood a fee not the purchaser. Professional real estate advisors make sure each client receives the proper information to help guide them to a positive result including recommending financing, intermediary for 1031 trades and alternative strategies that most investors may not be aware of such as zero cash flow transactions in the world of nnn lease properties. Triple Net Properties are quite different in nature with gross sales of the tenant, cap rates, location, length of lease and guarantee of the tenants very important in a final decision for investment. Tenants, as an example, can only afford to pay a certain percentage of their gross sales toward rent thus making it very important to their future health when leasing Triple Net Properties. What is considered a good demographic for an investor to purchase Triple Net Properties? Only skilled professionals that work on these properties daily can really give the investor a knowledgeable answer. Buying Triple Net Properties takes only a few short weeks but buying them correctly takes years of experience with a team of experts behind the investor. A skilled real estate attorney, along with a CPA and professional real estate advisor are essential for a great outcome.

Triple Net Properties have held up in value and actually increased over the past recession.

While most investments other than gold and silver have diminished in value, quality commercial Triple Net Properties have either stayed the same or increased in value. Many affluent foreign investors are investing heavily in these Triple Net Properties for they all have decided that their own countries, falling apart at the seams, are less likely to produce the security and returns offered by Triple Net Properties here in the USA. Thus the future looks very bright for nnn property due to affluent investors both here in the USA along with foreign money pouring onto the shores of this great country. These investors, off shore, like true Triple Net Properties for they don’t have to be held responsible for any care or maintenance and receive a check in their own mailbox monthly. Thus commercial real estate with all its diverse makeup and some being very risky, still is King in on specific category, Triple Net Properties which holds that title.

Are you overlooking a Commercial Real Estate boom? NNN Properties For Sale are the hottest sector in the real estate market today.

If your definition of the category is limited to office parks and shopping malls, both of which took a drubbing during the financial crisis and haven’t fully recovered, then you probably are a skeptic. NNN Properties For Sale have been and still are the king of the commercial arena.

Think a different direction like fast food restaurants, auto parts and drug stores and the returns get much larger. Such ventures, known as NNN Properties For Sale or NNN Lease Properties, are the best performing sector of the real estate marketplace. This sector has lost the least amount of value during the recession, yet rallied the quickest.

Describing NNN Properties For Sale

NNN Properties For Sale are usually free standing buildings in which a tenant agrees to take responsibility for maintenance, taxes and insurance during a long lease leaving the investor with little to do but collect checks. Investors typically buy individual properties or NNN Properties, through commercial real estate brokers such as www.westwoodnetlease.com or others, who provide NNN Properties For Sale, either alone or in limited partnerships with a few other investors, and then lease them out to occupants such as drug store chains, fast food restaurants, dollar stores, medical outfits, and in some cases big box retailers like Home Depot.

NNN Properties For Sale are generating annual returns of as much as 10% internal rate of return while individual investors and small groups of partners generally invest $500,000.00 to $5,000,000.00 per building. Some publicly traded real estate investment trusts concentrate on NNN Properties For Sale also. These returns have significantly beaten the majority of the Dow Jones stocks over the past year. In other words, now is the time to buy NNN Properties For Sale!

NNN Properties For Sale suffered during the recession, but less than other types of real estate. Whereas overall commercial prices fell by 40% during 2007 09, prices for NNN Properties For Sale fell by about 15% and have since recovered to even higher valuations. NNN triple net lease properties can diversify your portfolio as well as stabilize your other riskier investments.

Risk Reward Tolerance Levels for NNN Properties For Sale

Like all kinds of investing, NNN Properties For Sale are based on risk: the more you’re willing to take, the greater your potential returns. There are several important factors that determine an NNN Properties deals riskiness: the credit worthiness of the tenant, the location, physical condition and functionality of the property, and the remaining term on the lease (shorter is riskier). Also important: the occupancy cost or health ratio, defined as the percentage the store pays in rent relative to it’s store sales (the lower the ration, the better). Besides overall economic risk, there’s the risk of picking a tenant whose product or service might fall out of favor. Affecting NNN Properties For Sale may come with the changing consumer trends, which can wipe out cash flow of NNN lease properties, as happened with the video rental business during the past decade. You need a good tenant, then you need an optimal location and to know what the market rent is in that location. When considering NNN Properties For Sale, this is absolutely key to the success.

Positive Outcomes for NNN Properties For Sale

As with most income properties, investors can come out ahead or behind on NNN Properties For Sale in two ways: through price appreciation and income. The best measure of income potential is the so called capitalization rate, or the net operating income divided by the purchase price of a property. In recent months, cap rates have been falling because property prices nationally are rebounding. More investors are going after fewer high quality properties under the format of NNN triple net lease structure, driving prices skyward. This is considered a positive sign for the broader commercial real estate market but it means that the easy money in NNN Properties For Sale might be subsiding.

There Are Several Categories OF NNN Properties For Sale Structured Under Commercial Lease NNN’S and NNN Lease Type Agreements

The most respected and desirable NNN commercial lease type from the investor’s stand point is the NNN Ground Lease that is described in the NNN lease definition language as:

• An NNN lease agreement in which a tenant is permitted to develop a piece of property during the lease period, after which the land and all improvements are turned over to the property owner. A ground lease indicates that the improvements will be owned by the property owner unless an exception is created, and stipulates that all relevant taxes incurred during the lease period will be paid for by the tenant.
• Regarding NNN Properties For Sale, NNN lease agreements or commercial lease NNN’s will normally be fee simple arrangements where the investor will own both the buildings and the land. These usually sell for higher cap rates due to the NNN lease agreements that they are written under.
• Additional NNN lease properties for sale include industrial, medical and office buildings of all varieties. An example is a Fed X warehouse normally leased by the parent company for 10 years at a fixed rent, lease type NNN, with options to renew.
• Walmart may be the best illustration of NNN properties for sale with the combination of safety of the credit tenant under a “lease NNN” agreement and long term rent. Because this is considered an NNN lease property it becomes very desirable with the investment community.
• The call to brokers from investors nationwide is “what do you have for NNN Properties For Sale?” and companies also will request to lease NNN for they are wanting to occupy and to control the entire grounds and building for their use and care.
• Ten NNN Properties For Sale continue to be the most popular and competitive leases on the market.

Why Add NNN Lease Property To Your Investment Portfolio?

Essentially, single-tenant NNN Leased Properties, which are part of the family of NNN Lease Property, gives you total (fee simple) ownership of a free standing, single-tenant commercial property.

NNN Lease Property, the leader of all commercial income producing investments and preferred properties, are chosen prime nnn properties; quality tenants are the trademark. One hundred percent ownership is achieved, and they are ideal for first time ownership by investors. A wide variety of tenants are available for nnn properties for sale. Building and land are being purchased. Single asset with nnn lease properties available for purchase of NNN Lease Property nationwide.

Price Range of NNN Lease Property and Financing Availability?

The price range for NNN Lease Property is generally between $750,000 and 8 million. The dollar stores and fast food restaurants, a category of NNN Lease Property are the most affordable, while drug stores and Big Box retailers are on the higher end. A small percentage of the NNN Lease Property, big box retailers such as Home Depot, Lowe’s and Wal-Mart, can bring from 10 million to 25 million. To view a sample of our NNN Lease Property, visit our website at www.westwoodnetlease.com and go to Browse Properties. Because most investors borrow funds to acquire NNN Lease Property, it is essential for them to work with a qualified mortgage broker to find the best possible financing for the type of NNN Lease Property being purchased. An analysis of factors such as credit, location, capitalization rates and loan terms is essential to determine the cash flow and security of NNN Lease Property. The minimum down payment usually required by lenders is 25% to 35% for investment grade NNN Lease Property and 35% to 45% percent for most other tenants. With NNN Lease Property and their leases, you generally own the building and the land, but ground leases where you own the land only, also are popular. We will take the time to explain the advantages and disadvantages of each of these investment options to you. Our customers have come to depend on our investment specialists for extensive value-added services, including educating them about the relative merits of alternative investments analyzing cash flow and debt service, researching tenant credit and the merits of one location over another and much more. Whether you are acquiring a ground lease or the more traditional NNN Properties, you will own a 100 percent, undivided interest in the property. This is not tenants in common arrangement, where you own only a portion of NNN Lease Property, sometime with 30 or more partners.

Why Investors Favor NNN Leased Property and the Advantages of Owning them?

Primarily, investors like the simple enjoyment of owning income property without having to deal with management and maintenance. You merely collect a rent check once a month from nnn properties, who have signed a 10-year to 25-year non cancel-able lease. The tenant pays the taxes and insurance and is responsible for maintenance and capital improvements. Many landlords burned out by the constant hassle of managing their properties are turning to NNN Lease Property for relief, but others are also taking a serious look at the NNN Lease Property nationwide. Because finding the time and energy to handle management and maintenance duties are not an issue, they are extremely advantageous to own, operate, manage and sell. They are easier to finance and sell than most other forms of income producing property.

Advantages of owning NNN Lease Property that are leased.

• You can defer capital gains taxes through a 1031 tax-deferred exchange.
• NNN Lease Property and their leases are either 100 percent management–free or require very little involvement.
• NNN properties have high residual value and is a liquid investment.
• You can get non–recourse, fixed financing for more than10 years with many NNN Lease Property.
• There are no vacancy factors, tenant improvement costs, management fees or leasing fee.
• Location! Location! Location!
• NNN Properties are typically in prime retail areas with high traffic counts and great demographics.
• You don’t have to worry about tenant turnover. Your tenants sign leases for 10 years to 25 years.

NNN Lease Property are easy to acquire

Since investors don’t have to worry about managing their NNN Lease Property, many of our clients purchase real estate far from their home states. Most of the NNN Lease Property purchased are brand new and the tenant is either operating the store or ready to move in. Once you have contracted to purchase one of the NNN Lease Property, the heavy work begins for your attorney, accountant, lender and intermediary if in a trade. However, the good news is that you and your advisors are traveling a path already traversed by the developer, its lender and tenant of the property. The result of this work is a legal review of the lease and other items, including the title, survey and environmental reports associated with it. After the work is complete, all that remains is a financial commitment and possibly a visit to the property site. Most of the transaction can be handled quickly by overnight mail. The speed of the transaction is helpful to investors making 1031 exchanges, who have only 180 days after selling one property in the NNN Lease Property family to buy the replacement property, and allows all buyers to get into investments quickly and begin collecting rental income.

What is difference between single Net Lease, a double Net Lease and an Absolute Triple Net Lease in the family of NNN Lease Property?

To simplify matters, think of it this way: The more nets, the less expense and trouble for the landlord! NNN properties include a single-Net lease , where the landlord pays the real estate tax bill and operating expenses but will be reimbursed to some degree by the tenant. Each lease is different. The landlord is responsible for the structure and integrity of the building and the roof. Under a Double-Net Lease, in most cases, the landlord is responsible for the structural integrity of the building and the roof, while the tenant takes care of all operating expenses, real estate taxes and insurance. Under a NNN Lease Property, the tenant usually is responsible for all operating expenses, the roof, real estate taxes and insurance. Sometimes owners hire a third party management firm to verify the tenant is taking care of its responsibilities in preserving the integrity of the building. Under an absolute NNN Lease Property, the landlord has no responsibilities. NNN Lease Property have many of these leases that are in place and need to be examined by your attorney. The wide variety of leases under NNN Lease Property require a professional team guiding the purchaser. Real estate experts found at www.WestwoodNetLease.com, attorneys and CPAs hired by the purchaser, play a role in purchasing the NNN Lease Property. NNN Lease Property being so diverse in nature, require careful analysis to determine which type of lease structure the tenant is under. Whether single, double or nnn property structure, NNN Lease Property are a better avenue in most cases for investors. Financing is easier with nnn properties due to the normal strength of the tenant and their lease structure. The value remains more stable in times of economic woes with NNN Lease Property proven in the last recession and the stats that have been published in various papers. End result, nnn investment properties deserve a serious consideration when investing in income producing property through the triple net structure.

The single Tenant Triple Net Lease is typically a free standing building that is leased to a single business tenant for a long term, often 10-25 years. The term originally meant net of taxes, net of insurance, and net of maintenance – hence triple net terminology. According to the terms of absolute Triple Net Lease, the tenant is responsible for all property operating expenses, including insurance, taxes and all maintenance. NNN properties are made up of various classes like retail, office and industrial.

Triple Net Lease property offer the benefit of little or no management responsibilities, as the tenant pays for most, if not all, of the expenses depending on the terms of the lease. The investor receives the rent with little to no other involvement. With absolute Triple Net Lease, the tenant is responsible for all expenses, making this a true passive investment for the owner, and allows an investor to buy property far away from their place of residence.

Triple Net Lease with commercial tenants are generally high quality business tenants and they usually have a vested business interest in making sure that a location is well maintained and attractive to customers. As a result, the tenant has an economic reason to enhance the real estate investor’s property over time, and frequently the tenant will make significant property improvements at their own expense to most Triple Net Lease property.

Single Tenant Triple Net Lease properties include Retail, Industrial and Office buildings. Major restaurant chains like McDonalds and Burger King operate under Triple Net Lease agreements typical of nnn properties. Retailers like Target and Home Depot, as well as specialty service centers like Jiffy Lube and Pep Boys, also belong to the long-term Triple Net Lease family. Industrial businesses like FedEx, distribution centers, and manufacturers operate under Triple Net Leases as well as medical offices and educational institutions enter into the arena of the Triple Net Lease.

How is the structure with Triple Net Lease different from other commercial leases?

Single tenant Triple Net Leases differ from other types of Triple Net Lease properties in two important ways – 1) the numbers of tenants, and 2) the tenant’s responsibilities.

Most other commercial property investments – such as office buildings, apartments and retail properties – have multiple tenants, and the real estate owner pays the operating expenses and provides on-site management. The owner takes care of leasing out individual units for short terms, renovates the premises as necessary, collects the rent, pays the property taxes, maintains the property, and is responsible for all insurance, legal, accounting and other expenses. Triple Net Lease Properties avoids these issues and provides safety without the hassle of the pre-mentioned responsibilities. Many NNN properties for sale nationwide that vary in size and price range.

In a single tenant Triple Net Lease agreement, a corporate and/or individual tenant agrees to be responsible for all of the expenses associated with the ownership of the property in return for a long term lease. The investor/owner’s role in Triple Net Lease Properties, is a passive one – effectively like “coupon clipping” in bond investments. Investors just go to their mailbox to collect a monthly rent payment.

An added investor benefit in Triple Net Lease Properties can be property improvement over the term of the Triple Net Lease. Conscientious, credit-worthy corporate tenants usually improve the appearance and functionality of their leasehold in order to be more successful with their clients or customers. As a result, the property in question is well maintained, and may even appreciate in price as a result of improvements, which would represent an additional return to the investor at the time of sale of these Triple Net Lease Properties.

A Triple Net Lease is generally structured in one of three ways:

1. Sale/Leaseback: A sale and leaseback financing is structured through the sale of a property owned by a strong business. The business/tenant sells the property to an investor, and leases it back on a long-term Triple Net Lease just part of the family of Triple Net Lease Properties.
2. Existing Property Sale: The sale of an existing nnn properties by a third party investor.
3. Build-to-Suit: A developer enters into a long-term agreement with a corporate tenant, builds the facility to the tenant’s specifications, and then sells the property with the new NNN lease upon completion of the development or before another example of Triple Net Lease Properties.

What is a Sale/Leaseback and why is it considered part of Triple Net Lease Properties?

A sale/leaseback is when a business sells its commercial property for current market value and then leases it back from the buyer, typically using an absolute NNN lease properties structure. The seller retains the use of their real estate and frees up capital which can be used to invest back into the business. Real estate sale/leasebacks are popular with business owners because they generate capital for immediate use within the business, and create a predictable rent that is deductible for federal and state income tax purposes. These entities become an integral part of Triple Net Lease Properties as well as NNN investment properties.

What are the primary benefits of a Triple Net Lease representative of the family of NNN Properties?

Triple Net Lease investments benefit investors and tenants alike. Tenants with nnn leased properties enjoy the security of a long term lease at favorable pricing, and control over the property in which their business is housed, as well as control of maintenance and renovation costs. NNN properties offers unique qualities that simply other commercial properties don’t.

Investors similarly enjoy the security of the long term Triple Net Lease, and the high cash return on their passive investment, as they own the NNN Lease Property yet have zero on-site management responsibilities and no operating expenses.

Triple Net Lease Properties investment are also flexible and offer additional upside, as at any time the investor can cash-out, most often with a profit, by selling the property, as the value of the real estate frequently appreciates during the lease term. The investor also can hold the property, allow it to further appreciate in market value, and lease it again at a higher rate to the original tenant or a new tenant when the lease term expires.

Finally, Triple Net Lease Properties are also relatively easy and safe for investors to engage in, as they are hassle-free transactions with minimal costs, and present a minimal risk with strong tenants and long leases. An investor can also choose an opportunity for higher cash returns by taking on less than investment grade tenants.

Limit of Land that is zoned for commercial purposes:
Anytime you have a restricted use of land just for a certain type of property you create most likely a higher valuation for that parcel and its investor as the years go by. With commercial real estate investments, this concept is very evident and repeated in most major cities. Major streets and certain areas are utilized for income producing properties producing cash flow and commercial real estate investments surrounded by many residents that support these places of business. The support of the residential community is absolutely necessary to be able to support these businesses primarily consisting of retail and office buildings. Commercial real estate investments require rent to be paid by the tenant to a landlord producing increased cash flow that allows the landlord to support the building and make a return on their investment.

Income Producing Properties are stable and productive while producing cash flow:
These commercial real estate investments are normally occupied by quality tenants that run different businesses supported by the local community. The secret to investing is to choose a growing area that has enough income per family to support the services provided by these businesses. Offices are needed to provide space for the residents to run their businesses that can’t be done in their homes due to zoning restrictions. Commercial real estate investments can be seen, touched and felt by the landlord and not just a stock certificate that can shrink in value over night. The tenant running a business has a lot to lose and a substantial investment both in time, money and cash flow to make the business work.

So when the landlord chooses a tenant they must check the background and the financial strength of the entity before renting to the business. The safety of commercial real estate investments due to great locations will always provide for the space future businesses need and to replace older ones that may fail due to various reasons. No cash flow will lead to a closing of a business and its jobs.

Shelter and tax advantages are strategic advantages:
Commercial real estate investments offer shelter to income through depreciation of the building that will off-set some of the cash flow income generated from the tenant to the landlord. In addition taxes, repairs and other expenses are again off-set against income, limiting the tax burden for the investor. When selling the commercial real estate investments, the 1031 IRS trade rule that allows an owner to trade into an equal or greater valued property for the one sold may prevent the owner from paying any capital gains tax on a profit from the sale. In addition, extra depreciation from the property can possibly apply against other cash flow income generated from the owner on other passive income that may have used up their depreciation benefits but still generating cash flow that is taxed. Always check with your own CPA for guidance in tax issues. We are not giving tax advice simply stating possible considerations when buying commercial real estate investments.

Typical increases in rent and triple net structure:
Commercial real estate investments may be structured with leases that require the tenant to pay for all taxes, insurance and repairs to the property which is called a triple net lease.

Thus the landlord simply gets a check in the mail box and has no responsibility for anything to do with the building. Rent increases, called bumps in the lease, are typical paid every few years that range between 7.5% to10% for each period of time passed. This will allow the landlord to keep up with inflation, increase cash flow and adds another advantage to commercial real estate investments.

But what to invest in is the question? Income property is a leader when choosing a segment of the investment world for the following important reasons:

We all know that investments come in many forms but in commercial real estate investing there are many sub categories. By using some commonsense, you can quickly narrow down the investment categories to just a few for your own personal choice. How and what really matters in the process is the driving factor in deciding the right investment property for you. Think about any major city or town that has little land left to build upon. What then is likely to happen to the commercial real estate property value of these select locations in that city or town? The land rises in value for there is limited space to build on and the businesses utilizing these properties are now going to pay higher and higher rent to occupy these properties or buy them for greater prices. The population of the area has grown but the land has been already utilized for its commercial use such as retail/office to service the community of the residential population. The conclusion, large populations with limited services brings higher commercial real estate valuations for the commercial properties in the area.

In smaller communities or rural areas there are just a limited amount of people living there but lot of land so why buy commercial real estate investments in these areas?

The services that are there are usually the only game in town and the small population is very dependent upon their commercial use, thus these services prosper for years and gain the advantage of all the spendable dollars of all the residents. The town can’t support numerous retailers or offices thus the few do great. The returns on investments are higher for the real estate is not as desirable compared to a large city lot. Higher risk brings higher reward!

Several tenants in one complex verse a single tenant when considering investments in commercial real estate income property! What is the better choice?

The decision of choosing apartments or office buildings verses a single retail tenant on a major street is another challenging decision in your investment strategy. More tenants spread the risk of vacancy issues but add a great deal of possible stress with constant problems dealing with many renters and their demands. A single tenant avoids the stress of dealing with many issues due to the triple net structure of the lease. Where the tenant is responsible for all aspects of the property they are renting not the landlord. But of course danger is non avoidable if that single tenant shall fail in business or not pay their rent for you have placed your entire investment in one company or lessee. That is why you must choose the credit tenant that has long term stability in a field that is growing not shrinking in the business world. Simply beware of placing all your eggs in one basket without doing your homework first.

Investments of all kinds can be sometimes risky, smart, safe, improper, diversified or fool-hearty. What to choose or which to eliminate is a tough decision and may be very costly in a positive or negative manner. Investing in commercial real estate has always been one of the top choices when thinking of long term appreciation and steady returns. But like every other category one has to be cautious in the selection of just the right fit with your own risk reward tolerance level guiding the way.

Should the investor select many tenants like apartments, one tenant in a retail building, office or bulk warehouse or medical and storage facilities? The economy will dictate the choice, as for example, homes become restrictive due to price or lack of lending and apartments for most people are the end outcome, the investments in apartment buildings may be the proper selection. If businesses are expanding and the economy is getting strong, office buildings could be popular. If major industrial companies are the hot item and warehouse space is required, the commercial real estate investments in that sector may be appealing. Shortage of space living in an apartment complex without sufficient storage, may lead to the popular store facilities as the investment vehicle.

Location and quality of tenants in most cases will determine the success of your choice in investing in commercial real estate. If a tenant should become bankrupt or leave a location it is important that the location the investor chose to purchase be one of high value so that the next tenant will find it appealing and pay a rent that will satisfy the investor and produce the return that is satisfactory. The better the tenant the more valuable the investment in commercial real estate will become. Loans on the investment property will be easier to achieve and the lower rates will follow allowing a higher and safer investment for the buyer.

Length of lease and stable tenants add to the equation and become very relative in the investment decision process of commercial real estate selection. Ten years or more seems to be a magic number for many commercial real estate investors for the lease terms and investment grade credit meaning BBB- or higher is also expected for safety. The rating agencies have their own codes and grades for public companies and are a guide in selecting the right investments in commercial real estate for many affluent investors.

Investors look for diversification so that they don’t rely on one distinct field or asset group to invest in. While treasury notes, CDs, gold, silver, stocks and bonds are essential for a proper investment portfolio, investing in commercial real estate is also essential to be a major factor in long term stability and success of long term strategies for maintain your investment equity and keeping up with inflation.

Maintaining one’s capital while still receiving a nice return is paramount in the investor’s mind today. Regardless of where you live, staying ahead of inflation and keeping your equity while doing so, is the key to investment strategy worldwide. Commercial real estate investments in the USA are a leading component in the affluent investor’s portfolios.

Led by the triple net investments, such as Walgreens and Cvs drug stores, along with McDonalds and Auto Zones, the commercial real estate investor is in safe hands while maintaining their equity and creating a safe return along with tax benefits galore. Deduct all expenses and interest from the gross income of the investment properties, receive depreciation against the net income and finally trade into another investment property of equal or greater value to avoid a long term capital gain. Expected internal  rate of returns range from 7% to 12% .

Various choices of asset classes exist such as Apartments, Medical, Office, Warehouse, Retail and Storage facilities. Commercial real estate investments can be financed easily due to the quality of the tenant and location of the investment property.  If management is necessary for out of the country or out of state investors, it is easily accomplished with professional commercial real estate managers in every city across the USA. The commercial real estate pros are adapt for leasing, managing and repairing buildings and sending you a statement monthly along with your check for the results only if the investment property is not a true triple net lease requiring no interaction from the investor.

With the US economy getting stronger along with the safety of the country verses the problematic economies worldwide, as demonstrated in Europe, it is an easy choice of investment considering the other options.  Investments in all forms such as CDs, treasury notes, bonds, stocks and commercial real estate investments should all be a part of a solid portfolio that balances each asset against world issues. Wars, sinking economies, trade problems are an integral part of investments and commercial real estate investments in the US tend to negate some of these pressing problems.

The right investments are critical today to maintain your savings and increase your income to stay even with inflation. With food, gas and basic necessities going up monthly it is paramount to increase your passive income along with keeping your equity safe. United States commercial real estate helps in both cases.

The huge variety that is available with credit tenants in both small and large cities in every state, make this form of investment a standout with sophisticated investors worldwide.  Triple net lease structure also makes it easy to own and not worry about the investment from another country. The tenant may be responsible for all items such as taxes, insurance, maintenance of the land and building and thus the owner gets a check in the mail regardless of where they live with no aggravating phone calls from tenants.

Your own Risk/Reward tolerance level is determined before buying anyone of these investments and rewards are high when risk is taken. Anywhere from 8 to 10 percent with riskier investments and 5 to 7.5 percent for safer ones is to be expected.  United States commercial real estate offers a variety of options such as office, warehouse, medical, apartments, retail, self storage, and hotels to invest in. Commercial brokers can handle the various tasks if there are any and will manage, lease and maintain your investments in any town across the country. Sending you a monthly statement along with a check is very simple and giving you a tax analysis can be included.

When one sector is weak another sector picks up the slack, so there is a balance between tenants and investment strategies.  25% to 40% are standard to place down for a loan while interest rates are very low at this current time. Length of loan depends on the strength and location of the tenant and property. Untied States commercial real estate is easy to finance as long as you pick a nice tenant and good location and have a decent down-payment.

Write offs are abundant along with substantial tax advantages such as 1031 trade laws and depreciation allowances. Taxes insurance, interest, maintenance, management fees leasing fees and depreciation give to the investor in United States commercial real estate distinct advantages for higher internal rate of returns than most other investments.