If you, like me, are becoming more and more frustrated with seeing our stock and bond portfolio values plummet and suffer the daily angst of triple digit swings on Wall Street, don’t give up hope. The reason being there are still quality conservative investments out there. You just have to find them. And the one alternative I believe that should be given a very close look is the old tried and true alternative of bricks and mortar – real estate. And of the entire spectrum of real estate investments available for purchase there is a property type that has been overlooked by most high-net-worth individuals – Net Leased properties.
Net-Leased Real Estate
These are individual properties leased to credit tenants. Length of leases of 10 years to 25 years are the most common and most of the properties are brand new construction. Net- leased refers to the tenant being responsible for all operating expenses – real estate taxes, building insurance, utilities and building and ground maintenance. In other words, the investor has little, if any, management responsibilities. If you are an executive without the time or inclination to deal with tenants and maintenance issues, properties that are net leased is the only real estate you should consider.
Net-leased real estate can also be a strategy to generate constant, stable and predictable monthly/annual income with added tax benefits potentially derived from depreciation and interest expense deductions. Investors should contact his/her tax advisor to determine if passive activity loss rules apply.
As with any real estate investment, net leased properties are only as good as the quality of the tenant. Fortunately, most of the properties on the market today have long term leases with credit tenants such as Walgreens, CVS, Goodyear/Firestone, Family Dollar, Dollar General, FedEx and many banks. The leases are all triple or double net so be certain to understand the difference between the two. A close reading of the lease in all cases will determine who is responsible for what.
The good news at this time is that cap rates for all offerings are rising making it more affordable for those looking to make a purchase in the near future. Financing a net leased property with a credit tenant is surprisingly easy for qualified individuals or partners.
Conclusion
If you are a high net worth, accredited or qualified investor, or a group looking to form a partnership to buy conservative, stable and income producing commercial real estate, net leased properties should be high on your radar screen. Keep in mind that a seasoned commercial real estate professional who will represent a buyer’s interest should be consulted when searching for a property that meets an investor’s goals and needs. If suitable for the investor, this asset class can add stability and income in a volatile market.
Real Estate Investments For High Net Worth, Qualified and Accredited Investors
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