Single Tenant Triple Net Investment Properties - Risks and Rewards

Do you like the safety of a corporate deposit in your bank account automatically every month?

Many seasoned real estate investors have achieved this goal by single tenant triple net investment properties. This has been the go-to super secure place to 1031 exchange your real estate investment capital gains for decades. They range from Burger Kings to Dollar Stores to CVS Drug stores and many other single retail tenant operators.

But today, with retail being hit by both protests riots and Covid-19 retail curtailment, this industry is on shaky ground.

I would love to speak with anyone considering a 1031 exchange into a "passive" investment. The play is still good, but the choice in where, when and what to buy is key. Let's plan and execute for your best financial outcome. #realestate #1031exchange #investmentproperty #cre

Two Large Lot Mid-Century Aparment Investments in Orange County for Sale

Probate sale of two nearby multi-family properties - all bungalow style duplexes on large lots in Orange, CA. These are well located fully occupied investment properties available for sale via an approved probate process. The large lots, single story, duplex/bungalow units generate longer term tenancies due to more personal space and no up/down tenants. Perfect properties to have private patios & yards. Excellent parking too. Outstanding 1031 exchange replacement properties. For more info on these rare apartment properties, call Mario Pinedo on his cell 415-269-6249.

Apartment Investments Orange County Southern California

I have recently been comparing apartment investment opportunities in the San Francisco Bay Area to Southern California. The Bay Area (and especially Silicon Valley, The Peninsula and San Francisco) is offering very low rates of return. Also decent investment properties are hard to come by with lots of buyers chasing deals.
These same dynamics are also happening in west Los Angeles. This area is in huge demand causing cap rates to be very compressed.
Alternatives to these areas are southern LA county and most parts of Orange County.
Solid, stable apartment buildings can be purchased in the low $200 per foot range. Fourplexes routinely can be found in the $700,000 price range for 3,500 square foot buildings in decent areas.
There are also great coastal locations with apartment buildings perfectly suited for 1031 exchanges. These premier locations can provide great rental rates and occupancy with potential owner-user unit allocations.

Single Tenant NNN for Sale

Just listed is a Single Tenant NNN property with McDonald's as a corporate tenant.
Cap rate is 4.75% - which is not wonderful. Upside is a 10% bump in rents in 12 months.
Future increases are 10% increases in rent every 5 years of base lease and option periods.
Ground lease - with no landlord responsibilities. This pad is part of a larger grocery anchored shopping center.
Price is $1,726,000 with a original lease expiration in 13 years. A big upside is a strong residential location in Miami, Florida.
There are some back woods locations for single tenant NNN deals - this is not one of those. Good 1031 exchange vehicle.
Have you considered selling your equity rich residential investment property? Let's run the numbers.

Sacramento NNN Strip Center for Sale with Starbucks Anchor

Just hit the market is a two tenant NNN Strip Center for sale in Sacramento with 10 year leases and great tenants.
6% cap rate, $2,662,408 price, Starbucks & Z Pizza leases for both tenants terminate in Aug 2023 and Dec 2024 plus options beyond that. At this price, you can achieve positive leverage if you add financing. Demographics are strong with $87,000+ average household income within 1 mile radius.

Los Angeles California Commercial Investment Property for Sale

Top 3 deals from the west LA commercial meeting today:

1. 15 bulk condos new construction, fully rented, North Hollywood, great hold then sell in 2-3 years for big upside - $6,500,000.
2. 32 unit apartment in west LA near Culver City, built 1986, no rent control, great value add deal - needs updating - rents $200+ under market per unit - $7.4M
3. Development site approved for 52 apartments + 3,600 retail space, Van Nuys, 26,885 sqft lot, $2,350,000.

 And check out our new Los Angeles Bank Owned Commercial Property for Sale site:

www.bankownedcommercialpropertylosangeles.com  

 and our investment site in LA: www.losangelesinvestmentrealestate.com

Call me for detailed information on these and other investment or development deals.

Starbucks Commercial Single Tenant NNN Investment in West Los Angeles

I like this deal - it's a single tenant NNN Starbucks in a great area with high household incomes and lots of new condo construction nearby. Excellent west Los Angeles county location. The picture is this morning at 8:00am, the place was very active with commuters grabbing their morning grande latte.

6.5 cap rate for 18 months, then a 7.25 cap rate for the next 5 years. Corporate Starbucks signature on the lease. This is a solid asset, perfect for a 1031 tax-deferred exchange or for a direct investment giving you a 5x multiple return compared to the 1.25% in the local bank CD. Call me for details. This Starbucks NNN deal will go fast.

Single tenant NNN investments, Ecuadorian dwarfs & DaVita Dialysis Centers

What do DaVita Dialysis Centers, a tribe of diminutive people in South America and your 1031 exchange into a single tenant NNN property have in common?

Let me start with this, do you remember buying your plane ticket at your local retail center where your trusted travel agent was located? Yes, it's been a while, perhaps some 15 years since they dominated the landscape of retail spaces. Now, you don't go buy a paper ticket next to the Starbucks, you buy it on your laptop at the Starbucks.

Do you remember the more recent local Blockbuster Video store or Hollywood Video store where you walked in a few times per week to rent your VHS (ok, that's too far back, insert DVD for you youngsters). Now on-demand video and Hulu reign supreme.

Were you at the Howard Hughes Center mall last night in the Border's book store which is having a store closing sale? Why this travesty? Think Amazon, Kindle and Ipad magazine e-scriptions.

Ok Mario, what's the theme here? maybe... Technology kills things!

...and it kills things in relation to your commercial real estate investment.

One of the hot single tenant NNN property classes for sale are the dialysis centers that are popping up all over the map - think DaVita Dialysis as the Kleenex in this category. Hundreds of new DaVita centers are being built in local neighborhoods to service the needs of patients with poorly functioning kidneys typically an effect of long term diabetes disease. The investment concept around the sale of these NNN investments is that the centers will be well frequented by their base of committed customers for decades on out.

I was explaining my understanding of this to my muse Julie this morning in the car and she recalled Ecuadorian dwarfs in South America. (please hang on, there is a circular connection coming soon)

Apparently in the last few days, an article was posted about this tribe in the Andes where the genetic make up of the tribe makes cancer and diabetes virtually non-existent. So, the medical research world has invaded the little tribe to find the medical fountain of youth (or at least the fountain of anti-carcinogen) When (not if) this gene is isolated and when the drug company gets FDA approval, some of these ailments will be eliminated or reduced.

I may be overly focused on my favorite group of people - the commercial investors out there - and my concern is that there may be empty DaVita Dialysis centers on the landscape one day in the future - or at least some renegotiated leases because their business will slide.

Therefore, as a suggestion for your next real estate investment move, stay clear of over-valued NNN deals that may not be the hot investment vehicle of the near future. Instead, consider the basics of coffee, the local Burger King and my favorite - Taco Bell - as a healthy investment alternative. In my opinion, as healthy or not as we seem to be becoming, the US appetite will always crave the Whopper.

Chase Bank single tenant NNN for sale in Chicago suburb

I rarely post investment deals outside of California these days but this one looks very attractive. Lincoln Park is one of the most expensive suburbs outside of Chicago. Home prices average $1M+ and household income in the area is over $139,000. Chase is one of the winners in the banking world and this corner location on the main thoroughfare is a great location. Cap rate is 7.03%, $2,125,000 price with $149,336 net operating income. This is a sold 1031 exchange option or straight investment purchase. Call me for details on this quite popular investment opportunity.

Bay Area Investment Real Estate - Mario Pinedo, CCIM Investment Update O...

Investment Property update for Silicon Valley. Single family home sales and commercial investment opportunities from www.MPIRES.com and Intero Real Estate.

Single Tenant NNN Sacramento for Sale

A new construction, twenty year ground lease Taco Bell in Sacramento just came on the market. With a ground lease - the owner of the land has no maintenance obligations - the tenant maintains the building, parking lot and landscaping. This is a great investment 1031 tax deferred exchange replacement property for surety of income and no maintenance responsibilities. 6.5% cap rate. $95,000 in annual rent. Offered at $1,462,000. Call me for details 415-269-6249.

Update on in-house deals

Office Deals: Berryessa large home, short sale preapproved at $600K, goes on market this Friday.
Townhouse style condo Rose Garden, short sale, $325,000, newer, great location.
Local shopping center - $4.2M, 9.0% cap rate, bank directed short sale - no on market.
2 gas stations - San Jose & Gilroy - both distressed fixers - great traffic locations

Shopping Center Note for Sale Silicon Valley

There are some very good investments available outside of the obvious REO deals. In fact, most of the commercial REO investment properties sell at close to fair market value - some even exceed that price point. We are working closely with some banks to bring the better investments to the table. For various reasons (cash reserve issues, publicity, flooding the market, etc) banks are hesitant to foreclose on their bad commercial loans. The solution is a sale of the note/deed of trust to an investor at a discount. This then allows the investor to foreclose or deed in lieu the real property. One deal that we are reviewing is fully occupied and almost a 10 cap rate for an excellent building. We are also looking for investors to pair with these offerings.

Single Tenant NNN Family Dollar Store for Sale

Just listed is a Family Dollar store in Akron, Ohio. Amazing pricing on this solid investment property. 9.0% cap rate at a $737,733 list price. Corporate leased store by a company that is doing very well in this current economy. Over 8 years left on the lease. Corporate tenant pays for taxes and insurance. The store had $1,350,000 in sales last year. $52,000 average household income in a 5 mile radius with 240,000 population in that same area. This is a wonderful investment and amazingly priced.

Now - why is it so well priced? There is a lack of 1031 exchange buyers in the market since last year. This typical single tenant net leased investment would have sold to a west coast buyer who was selling his single family rental house with $400,000 in equity. Now that same rental home has $100,000 in equity - not enough to do an exchange and with that same house rented - why sell now? The buyers went away for the low price point NNN deals - and of course that affects the chain going up to the larger shopping center investments.

This is a great opportunity for someone with cash on the sidelines or an investment property in the right location that has not lost it's equity in the last 18 months. This same Family Dollar store will sell at a 7.5 cap rate in a couple years when the market solidifies. Very good deal indeed!

Absolute NNN California Burger King

Walmart pad ABSOLUTE NNN Burger King with 9 years left on lease. Built in 1998, this Burger King is operated by a master franchisee with 40 stores. Personally guaranteed by the franchisee. Currently $115,000 per year rent to landlord. Offered at $1,695,000. No landlord responsibilities! Perfect 1031 tax deferred exchange replacement property. Let's run the numbers on your single family rental or fourplex and see how much more you can get in income and without the headaches of management.

Absolute NNN or Ground Lease?

A majority of the single tenant NNN properties that are Ground Leases are marketed at a lower cap rate than traditional NNN leases. The (ir)rationale for this is that the tenant pays for all the improvements built upon the land and the LANDlord has no responsibilities. So, therefore, some would assume that the investment is more valuable and should therefore sell at a higher price/lower cap rate. I disagree...
What the landlord does not get in this scenario is the ability to depreciate the building - this value goes to the tenant. The shift of this financial benefit from landlord to tenant usually is very significant. And to pay a premium for this less-than situation is ridiculous. The far better alternative is the Absolute NNN lease. Whereby the tenant pays for absolutely all costs of the property and the landlord still has technical ownership of the improvements (building) so he can still depreciate the property.

Where to Invest?

Or what to invest in? That was a question just posed to me by a new friend of mine. Big question if you think about it. It all started off by her asking me if I liked Pinkberry frozen yogurt as we were walking through Santana Row. Then the conversation went to the competitors in that marketplace - Red Mango and others. Good or bad for an investor? They are making a volume of sales for sure. Does that make for a good real estate investment? I would say in general no. Starbucks was the industry darling for quite a few years. Everyone wanted a strip center with Starbucks as a tenant. And those single tenant Starbucks and strip centers sold at a premium (lower) cap rate. Now, with Starbucks closing locations, this darling is no longer courted. And owners of these will not be able to sell at the same premium cap rates that they bought. Starbucks was a trend - it didn't seem so at the time - it seemed as if the world economy had shifted to have an endless demand for coffee. Pinkberry is also a trend and trends wane. I'm boring and conservative when it comes to real estate investments - I like unhealthy hamburger and boring drug stores over flash in the pan froyo and grande lattes. And then there is the thing about location...

Cap Rates on Single Tenant NNNs Higher

Cap rates should naturally float above where financing rates are. This is especially true in small single tenant retail properties - let's call them the Burger Kings as an example of a NNN deal. On the West Coast, these deals would sell at about a 6% cap rate and purchase prices in the $1.0M - $1.3M range. Over the last decade, most of these purchases were tied to a 1031 tax deferred exchange of a typical rental house owner trading into an easy-management single tenant property. But what happened to the single family market lately? Those rental homes lost value and that stemmed the flow of people exchanging up into small single tenant deals. With buyers in that market drying up, motivated sellers of the BKs have had to lower their asking prices (increase their cap rates) to attract the fewer buyers. AND interest rates are low. So, the spread between interest rates and natural cap rates is unnaturally high. Good time to be shopping if you have cash (for a down payment) to do a deal.

San Jose NNN Dollar Tree for Sale

There is a great local NNN investment that just came available. On Story Road at McLaughlin in the heart of very dense retail development and renovation is a single tenant Dollar Tree on a new 10 year NNN lease. Offered at a reasonable 6% cap rate, the asking price is $5,128,000. The future upside is the 39,200 sq ft lot that the building is sitting on. The building was built in 1998 and has 4.59 spaces per 1,000 square feet or 55 parking spaces. If Dollar Tree does not exercise it's option to extend the lease in 10 years, the property will be well positioned to rent to another user. This is the time to get in to the San Jose retail market with a great location and great solid tenant. Call me for info!

Applebee's NNN Investment

3 year old Applebee's (I'm not a big fan of their food, although many people are)

20 year absolute NNN lease

Strong Missouri location adjacent to a Lowe's & Wal-Mart supercenter

54,000 square foot lot

7.75% Cap Rate

$1,185,000 price

These are the kind of strong tenant, great NNN lease term deals that are out there now for 1031 exchanges or straight purchases. Time to trade in the management intensive fourplex for a corporate rent check every month and higher net income.