Is location the most important thing with NNN investments?

[Dan Krause]

:D As a NNN investor is location just as important as any other kind of RE investing-Location, Location, Location? Or is it not as important. Because when you approach commercial lenders they are not at all interested in the actual appraised or assessd value of the NNN property. The lender is ONLY concerned with the past 3 years, current and projected incom on the NNN lease. At least this is what i am finding. I mean-would you (as an investor) finance a NNN property in California if you live in New York even if the NNN in California had excellent financials and a high CAP rate? What do you think? Dan :D

[Jeremy Cyrier]

There are 3 critical issues to watch for in NNN leases:

1. Understand the credit quality of the tenant. This means that they have the ability to pay the rent that they've agreed to over the term of the lease.

2. Location: are you buying good real estate? Make sure you understand the market, demand drivers, and the potential re-use of the site in the event that your NNN tenant goes dark or does not renew their lease at the end of the term.

3. What is your terminal market value? Don't assume that the price you're paying for the NNN deal is what you'll sell it for in 5, 10, 15, or 20 years. Remember, most if not all NNN deals are valued based on the future cash flows, which means that the underlying value of the real estate may change (decline) over time as the term of the lease shortens.