Tuesday, October 1, 2013

Forget the Advisers! Buy Commercial Net Leased Real Estate and Control Your Own Money

I am mad as hell at these Shylock's such as Bernie Madoff, and several others, posing as 'trusted advisers',responsible for painting an entire profession with the broad brush of incompetency and thievery. The same goes for the Wall Street high rollers with million dollar salaries and bonuses taking risks with our money that we individuals would never dream of taking. I am a commercial / investment real estate professional with 30 years of experience and believe me it burns my butt. I've worked long and hard for my reputation and quite deservedly, it is solid. So, the question is, where do you invest that will keep you in control over your own money? OK, so what's my answer? My suggestion is to buy commercial real estate, bricks and mortar.

Net Leased Real Estate

By purchasing a net-leased property you are accomplishing many things. First of all, you own the real estate fee simple, i.e. not through a stock such as a REIT or some other type of real estate fund that collects your money along with hundreds of others and buys what they feel will be in your best interest. YOU OWN it. These investments are called net-leased because the tenant pay most if not all of the real estate taxes, building insurance and common area maintenance such as snow removal, grass cutting and other building upkeep expenses. Thus, the monthly rental income received is Net to you. This type of lease is a triple net lease. A double net lease has the owner ultimately responsible for the roof and parking lot replacement and building structural integrity.

Most of the net-leased properties that are available for purchase today are brand new construction with leases anywhere from 10, 15 to 25 years in length. Surprisingly, most are with credit tenants and the leases are corporate leases, not guaranteed by an individual or a franchisee. The properties are located all over the U.S. and typically in growth areas - they are the retail tenants you see in your community such as drug stores, dollar stores, auto service and parts stores and bank branches. The majority of these investments are in the retail sector but some, such as FedEx Ground distribution properties can also be available for purchase. Medical buildings are very much in demand.

Cost and Financing

Be prepared to pay anywhere from $850,000 to $6,000,000. These are conservative investments and expect an after-tax return of about 5% to 6.5% based on 70/30 financing with interest rates in the mid sixes to mid sevens. And speaking of after-tax, many of these properties are what are known as passive investments that qualify for the advantages of depreciation and interest charge deductions. Of course, your tax adviser should be consulted when considering any investment. And yes, there is money available for these types of investments - quality tenants and qualified buyers with minimums of 30% to 35% equity.


If you are ready to take control of your own investment dollars you should consider net-leased real estate. The leases for these properties are long term and require little or no management time or talent. Most are new construction in good locations and leased to credit tenants. For an investor that appreciates an investment horizon longer than one or two years, these are great vehicles for growth.

To find a property that fits your needs and long term goals consult with a commercial real estate professional who will represent your interest in the transaction thus having no prejudice for one property over another. My business is exactly that. I will work on your behalf but you are in control of what, when and where you invest your money. If you, like me, are fed up with other people handling your money - allow me to find you a net-leased property.

No comments:

Post a Comment