NNN Investments - getting started

[Jordan S.]

I've been a reader for a long time on these boards and after spending a lot of time looking at multi-family properties I've come to the conclusion that it's probably not the right investment for me. I live in California which makes the cash flow on local deals pretty scarce and it doesn't seem like out of town management is the best long term decision. I was introduced to the concept of single-tenant NNN investments a few months ago and the more I learn the more this seems like it may be the right kind of hard-asset passive income for me.

The returns seems good vs the ongoing management effort required so I’m hoping the experts on this board can help me with a few questions and highlight any key risks I could be missing.

1) Learning Resources: Online content and books are far less comprehensive than multi-family investing. Any great sites / resources I should dig into?

2) What are the big risks: I understand the fundamental risk of having one tenant, but looking at a NNN lease what else should I consider? Eg: time left on lease; ability to repurpose building.

3) Capital improvements: When I see a property that ‘underwent extensive renovations’ during what appears to be the middle of the existing lease, who paid for it? Other than during tenant turnover, what other costs can come up during the lease? Is there a risk during the renewal options?

4) Buyer agent: Does location of the agent matter for these kinds of investments? When looking at multi-family properties it was clear local knowledge was critical, but the NNN area seems more national in nature.

Thank you,
Jordan

[Frank Gallinelli]

Follow-up to Johnny's comment about the negotiated lump-sum buyout: You can handle this issue up front as part of the lease. If the corporate tenant wants to close that store, you can have a provision that they pay the value of remaining rent stream discounted at the 10-year t-bill rate. This, I believe, is preferable to having the space vacant for a long period of time, even if they are continuing to pay the rent each month. You get a lump sum and you also get the space back to rent to a new tenant.