Absolute Net Lease tied to a residential property - pros/cons?

[Kevin G.]

Hello all,

Thank you in advance for your feedback. I am seeking information on a potential deal I came across. The asset is a Residential home that is leased (absolute Net) to a medical treatment facility. I am familiar with the corporate NNN leases (primarily QSRs) but I have not seen this type of deal before.

Some high-level details: Lease term is 11 years left out of 15.

Cap rate: 6.5%

Leased to a Nationally recognized tenant. 

Questions/comments:

This type of deal vs a QSR-type NNN feels better- since the underlying assets is a residential home in a local real estate market I know well. So the growth of the home should be tied to the growth of the local RE market (as compared to a stand-alone NNN). This house sits in a desirable area, and should the tenant move out, I could easily move into, sell, or rent the property to a local family (albeit at a much lower cap rate). This feels safter than buying a QSR. Thoughts on this logic?

Loan: For this type of deal does anyone know if you could get residential financing? or would you still need to go the corporate route?

Tax: Are there any tax benefits from this type of deal vs a QSR-NNN corporate deal? I am assuming you can take depreciation at 27.5 years vs. 39.

I appreciate any help the forum can provide.