Is NNN The Right Choice For Your 1031 Exchange?

Is NNN The Right Choice For Your 1031 Exchange?

By | August 27th, 2019|Blog|0 Comments

The most popular way real estate investors generate revenue is by leasing out their property.

A triple net (NNN) property is a lucrative investment option for investors.  These are usually single-tenant retail properties with high credit ratings on “net, net, net” terms leased to tenants. That explains the acronym NNN.

The NNN model provides a consistent income flow with very few management obligations. In a NNN lease, the investors just need to make sure that they collect and deposit their rent check!

If you want to invest in a 1031 exchange, you should consider the following benefits of NNN property:

1.Lower Rent

One of the most significant benefits of a triple net lease for tenants is lower-than-market rent. As tenants are responsible for paying for the insurance, property taxes, and building maintenance, they may get charged lower rent in return.

2.Predictable Revenue Stream

As all property-related expenses are the responsibility of the tenant, the investor’s net cash flow is protected from fluctuations in expenses. When two parties enter the agreement, they are aware of the terms of the lease for the entire term. This makes it quite simple to know what the rental income or payment would look like in the first year through the end of the term. All rent increases are contracted and known by both parties. This ensures a stable and reliable income stream for investors that is guaranteed to occur barring a default or bankruptcy of the tenant.

3.Portfolio Diversification

NNN properties offer a lot of similar benefits as investing in other real estate classes.

No investment is 100% risk-free, including NNN properties.

NNN properties are an attractive option for investors looking for regular and steady returns with minimal management responsibilities but are not completely immune from risk.

4.Stability

If you are using an investment grade tenant in a long-term net lease, there are fewer chances of default on the lease payments as well as a contracted rent for the entire lease term. This makes it simpler to decide the profitability of the lease as well as the ability to sell for an amount that returns capital and profit. With smaller tenants, you may run into the risk of missed payments or late payments. However, with a national tenant with a corporate-backed lease will be paid on time and will have their obligations fulfilled.

A Quick Glance At Some Major NNN Lease Properties:

PetSmart, Inc. is the largest specialty pet retailer of solutions and services for the lifetime needs of pets.

Burger King is a famous global chain of hamburger fast food restaurants. It is the second largest fast food hamburger chain in the world.

McDonalds Corporation (NYSE: MCD) is the world’s leading global foodservice retailer in the world with over 36,000 locations.

FedEx Corporation (NYSE: FDX) provides customers and businesses worldwide with a broad portfolio of e-commerce, transportation, and business services.

AutoZone, Inc. (NYSE: AZO) is a leading automotive aftermarket retailer in the United States based off both sales and store count. AutoZone operates approximately 5,000 stores in 48 states.

Individual tax situations can differ and can be quite complex. It is advisable to seek guidance from a tax professional in a specific situation. If you are looking for a NNN Property, call 1031 Xchange at 1-888-993-2835 or drop an email: info@1031xchange.com

“Our tax-deferred 1031 exchange programs can save millions in taxes, increase investor equity, and compound annual cash flow distributions and returns”