Good Morning from The Sunshine State!
Couple of things to discuss this morning:
We’ve all heard the old adage about the three most important aspects of Real Estate being:
Location, Location, Location.
I would venture to say that the three most important elements in Triple Net Lease Real Estate are Lease, Tenant, Location. You see it’s the Lease that dictates the cash flow. And it’s the Cash Flow that determines the Value.
Let me explain: When it comes to Triple Net Lease Investments it’s the cash flow from the property, the length of the remaining term on the lease, and the creditworthiness of the tenant that mainly determines the value. Value in Triple Net Lease Real Estate all revolves around risk.
The shorter the remaining term on the lease, the greater the risk that your tenant may not renew, move out and your location goes dark. The weaker the tenant is financially increases the risk that they may not be able to pay your rent. This greater degree of risk is reflected in a higher CAP Rate or cash flow. If the property has more risk, it will have a higher Cap Rate in order to make it more enticing for someone to buy.
An example of this would be a 20 year remaining term CVS at a 5.25% Cap Rate. Great credit in CVS along with a long term lease. Compare that to Joe’s Diner on the corner. Same 20 year lease, but the owner would be assuming a much greater Credit Risk in Joe’s financials as opposed to CVS’s balance sheet. So Joe’s Cap Rate might have to be 10+% because of the greater credit risk in Joe’s Financial Statement.
This Week’s Digest has a handful of 20 year remaining term Triple Net Leases, most with increases along the way. As I’ve mentioned previously, the appeal of a 20 year lease is that you can own the property for 10 years, enjoy the increases in Rent that the lease provides, and still have a very salable property. Whether you’re looking to sell as the next generation owner, or if Cap Rates are on the rise, you’ll still have plenty of lease left (10 years ) AND a cash flow that’s increasing with bumps in the rent.
Remember: the amount of remaining term effects the value of the property. Here a remaining term of 10 years with increases is far more valuable than a remaining term of only 5 years with the same increases.
A property with 20 years of primary term and annual increases just gives you and/or your survivors more flexibility when it comes to re-trading the asset and maintaining value.
This Week’s Digest is a snapshot of a variety of Triple Net Leases Single Tenant properties that have been sent to me by a variety of commercial real estate brokers from all over the US. What I’ve selected & am showing here is designed to give you a “flavor” as to where Cap Rates are on a variety of NNN properties with different credit strength of the tenants, different lease maturities and different locations.
Let me know if you have questions or require additional details on any of the properties listed. And if you don’t see what you’ve been looking for, let me know & we’ll be happy to do a National Search.
Again, save yourself a ton of time & effort by having us do the “heavy lifting” when it comes to finding NNN properties. There’s just no way that you can access the same properties that I see. Simply put, our Concierge Service can not only save you a ton of time, but it will also put properties in front of your that you most likely wouldn’t have seen. Let us do the work for you.
I have attached below for your review this week’s issue of our Weekly NNN & 1031 Property Digest.
As always, if you have Questions or would like us to help you with a property search, don’t hesitate to reach out to me.
Have a great week & let me know how I can Help!
PS- the Mom in the Photograph is mine, and although she passed away some years ago, I still miss her kind heart, wisdom & sense of humor every day. Happy Mother’s Day Mom, I love you!
Remember: Our Digest is just a “snapshot” of the types of properties that were sent to us this week from various sources all across the country. If you don’t see a particular tenant that you have an interest in, just reach out to us and we’ll go find it if it’s available.
This Digest is simply a posting of some of the daily email blasts I receive from brokers all across the country every day. It is designed to give you a “flavor” as to where the market is currently in terms of Cap Rates vs. Tenants vs. Length of remaining Term. These properties are all available for Sale at the time the Digest was pulled together. If for some reason you see something on our list and it is no longer available, chances are really good that we can find you a very similar listing in terms of Tenant, Cap Rate, & Term in a very similar Location.
Use the Digest as a tool to get an understanding as to “what’s out there currently”. Once you know the type of property you’re interested in, we can help you find the property, submit the Letter of Intent and begin your Due Diligence process.
Let me know if I can provide any additional details or answer any questions.
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