To contact Christina Porter, call her at 1-877-4TM1031, or e-mail her at Christina@TM1031Exchange.com for further assistance. TM 1031 Exchange specializes in assisting investors in planning and executing successful real estate investment strategies. Visit http://www.TM1031Exchange.com for a complete list of investment properties and to download a free 1031 exchange tool kit. TM 1031 did more than $100 million in successful 1031 exchanges in 2005.
There comes a time in many investors’ lives when they decide they would like to spend less time managing their real estate holdings and more time enjoying the rewards of their labors.
The traditional investment vehicle to achieve this “no hands” investment approach is the net lease property. In its purest form — called a triple net lease — the tenant manages the property, doing everything from paying the taxes and insurance, sweeping out the driveway to repairing the roof if needed. The only obligation of the owner is to pay any debt service from the rent check.
A further advantage of most net leased properties are long-term leases, typically 15 to 25 years with five-year options after that, with defined rental rate increases along the way, called bumps. That can provide steady income no matter what the condition of the economic or local real estate market. The keys to successful net lease investments are good demographics, long-term appreciation, long-term leases and a strong credit tenant.
THE FOLLOWING ARE VARIATIONS ON NET LEASED INVESTMENTS:
ABSOLUTE TRIPLE NET (NNN)
Also known as a “bond lease.” The tenant is completely responsible for all operating expenses including maintenance, repairs and replacement for the entire property, without limitation. This is the type of lease that most investors expect when purchasing a triple net lease.
DOUBLE NET LEASE (NN)
The double net lease is like the triple net lease only the owner is typically responsible for the structural components of the building such as the roof, bearing walls and foundation.
MODIFIED NET (AKA MODIFIED GROSS)
The tenant pays their own utilities, interior maintenance and repairs and insurance. The owner pays for everything else, including real estate property taxes.
TRIPLE NET SYNTHETIC
When the IRS approved holding title as a Tenant In Common (TIC) as a “like kind” exchange and subsequently allowing an investor to defer the payment of capital gains taxes, what some call a “synthetic” triple net lease, or TIC investment, was created.
A TIC investment provides the real estate investor with the advantages of a triple net lease, namely someone else manages the property. Frequently, TIC offers ownership in a larger institutional quality property, with either single or multi-tenants, with appreciation, cash flow and annual depreciation benefits. In addition to the net leased advantages, a TIC also provides the opportunity for an investor to further diversify its portfolio.
As with all investments, it is crucial that investors consult with their tax and legal advisors prior to making any commitments.
(You can reach Christina Porter at 1-877-4 TM 1031, or e-mail her at christina@tm1031exchange.com to discuss your specific needs. TM 1031 Exchange assists investors in planning and executing successful real estate investment strategies. Visit www.tm1031exchange.com for a complete list of investment properties and to download the TM 1031 Tool Kit. TM 1031 Exchange successfully did more than $100 million of 1031 exchanges in 2005.)
