Best and Worst 1031 NNN Investments - Deal of the Week

This post was written by our deal analyst Daniel Greenberg.

Daniel has looked at hundreds of 1031 NNN deals over the last few weeks and has some good insights into the evaluation of these two deals as 1031 NNN investments.

Brand New Advance Auto Parts | Chicago MSA | 14 - Year Lease

On the face of it this seems like a great 1031 NNN investment.  It’s a brand new Advance Auto Parts in Aurora, IL.  The location is on the corner of two heavily trafficked neighborhood streets and less than a mile from I-88 (76,000 VPD).  The site is an out parcel to a Wal-Mart, part of the Chicago MSA, and has 1-Mile Median Household Income of $92,196.  The lease is for 14 years at $18.25/SF/YR and is backed by a corporate tenant with investment grade credit. 

The property looks great, the location is good, and the tenant is strong, yet there are a few things red flags about this deal.  The lease is only NN, which means that the landlord is responsible for the structure.  The lease also states that if during the renewal options the tenant replaces the roof or HVAC, the landlord shall reimburse the tenant for the unamortized portion of tenant’s cost of such replacement at the expiration of the term. This means the landlord needs to be aware of potential issues with the buildings and can’t just sit back and collect rent.  The other issue is that the lease doesn’t include any rent bumps until the renewal options, which aren’t until 2031.  2031 is many years in the future and rent bumps are needed to hedge against inflation and raising cap rates.  A 14-year lease with no rent bumps gives little future financial protection to the owner. 

Ultimately, any deal is a good deal at the right price; this deal is being offered at a 5.9% cap rate, which does offer investors somewhat of a discount.  It all depends on what potential buyers are looking for.   If the buyer wants an absolutely passive deal and hedge against inflation, then this deal is not for them.

 Walgreens | Colorado Springs, CO | 10+ Yr Absolute NNN Lease

This is a strong NNN 1031 deal located in Colorado Springs, CO.  The property has good site visibility (intersection has 53,000 VPD) and is located in a strong retail corridor with tenants like Wal-Mart (across the street), Lowe's Home Improvement, Guitar Center, PetSmart, etc.  More than 252,881 people reside within a 5-mile radius of the site.  The lease has 10+ years remaining and is absolute NNN, meaning the landlord has zero responsibilities. Walgreens is the nation's largest drugstore chain, is an investment grade tenant (S&P: BBB) and ranks #19 in the Fortune 500 (2016).  The property is listed at a 6% cap ($492.98/SF), which offers potential buyers a suitable long-term return for a passive NNN investment.

For deal analysis like this, call us at 1-866-539-1777 or send an email here.

Recent NNN 1031 Closings

We are pleased to announce the following recent closings:

NNN Florida Walgreens: $8,662,371 – Sourced off-market deal through developer and broker network. Record setting cap rate of 4.85%. All cash transaction with 1031 exchange buyer. More Walgreens NNN For Sale

Triple Net CVS: $6,450,000 – Low leverage 1031 exchange buyer. 24 years left on absolute net lease – 5.32% cap rate. Solid midwest location. More CVS NNN For Sale

Net Leased Dollar General: ~ $1MM – high cap rate deal 8%+ with 7+ years on NN lease. Growing SE US location. All cash 1031 exchange buyer. More Dollar General NNN For Sale

For more details or help on your NNN 1031 exchange, give us a ring at 1-866-539-1777.

5 Things You Should Ask Your 1031 Triple Net NNN Broker

Here is the most recent Q&A in our NNN Property Video Series.

Thomas discusses 5 things you should ask your 1031 Triple Net Broker.  The video is below or can be found on youtube or the audio on itunes.

5 questions ask your 1031 Exchange NNN Triple Net Property Broker

1. How long have you been doing 1031 and NNN Triple Net brokerage? What kind of deals have you worked on in the past? What certification do you have; CCIM, SIOR or are you a member of other local or national organization?
2. What kind of deals are you working on now, will do in the future or have done in the past? Do you do apartment buildings, industrial buildings, single family houses, Walgreens NNN? You want to ensure you have a specialist working with you on your 1031 exchange and Triple Net property.
3. How do you get paid? The seller? Does the listing broker or the buyer pay the fees?
4. Will I sign exclusively with you as my only NNN broker or non-exclusively?
5. Where do the properties come from? Will you tap into your developer and listing broker networks and relationships forged over the years to get the best NNN properties? Or will you send me off market or pre market NNN properties and I'll have a chance at first purchase?

1031 Navigator helps investors nationwide find the best 1031 Exchange replacement properties in the shortest amount of time.  

Our focused expertise, experience and daily triple net market presence enables clients to complete their 1031 Exchanges with peace of mind and certainty.  1031 Navigator has been involved with over half a billion dollars of 1031 Exchange NNN Properties in over 30 states.

1031 Navigator is a service of Andrus & Morgan Co., a national commercial and investment real estate brokerage specializing in passive income investments.

For a free, no-obligation 1031 Exchange NNN Property Strategy session for your 1031 Exchange visit:

http://www.1031navigator.com

Is the Lease really a NNN Lease? - Triple Net Properties Q&A

Today we look at if the Lease is really triple net?  Is it absolute net, triple net or double net?

In NNN investing, the lease is one of the most important things. The point of investing in NNN properties is to have a "hands off" investment.

When buying NNN properties make sure to read the lease to see if it is really true NNN or not.

Many triple net brokers and NNN sellers will advertise the lease as "net leased" or "ease of management" or "minimal landlord responsibilities" . Often times the lease will have more landlord responsibilities that advertised.

In this Video and Audio Q&A Thomas Morgan, CCIM of 1031navigator.com talks about absolute net leases, NNN leases, and NN leases.

Beware of opening escrow without having read the lease to see if it is triple net or not. This will save you time and money on your 1031 exchange NNN property purchase.

Video

Audio Version

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1031 Navigator helps investors nationwide find the best 1031 Exchange replacement properties in the shortest amount of time.

Our focused expertise, experience and daily triple net market presence enables clients to complete their 1031 Exchanges with peace of mind and certainty. 1031 Navigator has been involved with over half a billion dollars of 1031 Exchange NNN Properties in over 30 states.

1031 Navigator is a service of Andrus & Morgan Co., a national commercial and investment real estate brokerage specializing in passive income investments.

For a free, no-obligation 1031 Exchange NNN Property Strategy session for your 1031 Exchange visit:

http://www.1031navigator.com

Multiple NNN deals from multiple NNN brokers

This is a dog eat dog business.  

May the best broker win. 

It could come down to who is faster, smarter, more charismatic, more pushy, timing or even luck. 

None of that should really matter though.  

Yes, you should know like and trust the person you helps you with your NNN property. But really it should come down to which is the best NNN property. And which one meets your personal goals.  

Let's change may the best "broker" win to may the best "deal" win. 

What NNN deal matches your criteria better?

Let's compare traffic counts, demographics, retail sales, retail supply, market rents, tenant rent, market comps, land prices, cap rate, increases, likelihood of renewal or re-leasing, financing options, financing costs, "headache" factor, etc etc etc.   

Thats what we do for our NNN clients.  

80-90% of the deals out there are crap. We send our clients those deals that are the best long term investments for them and their families. 

May the best deal win.  

And the NNN broker who procures that NNN property win and earn the business. 

NNN Properties - What Price Should I Offer?

When making an offer on triple net property you should first assess the asking price relative to the market.

If the NNN property is priced right, a good first offer is 90% + of ask price. This will still allow room for you to get a deal on the NNN property but also ensure the seller responds. Thomas Morgan, CCIM of 1031Navigator.com shares some offer info on a $6MM+ NNN 24 year CVS NNN property he is working on.

For a FREE 1031 Strategy Session call 1-866-539-1777 or go here.

1031 Navigator helps investors nationwide find the best 1031 Exchange replacement properties in the shortest amount of time.  

Our focused expertise, experience and daily triple net market presence enables clients to complete their 1031 Exchanges with peace of mind and certainty.  1031 Navigator has been involved with over half a billion dollars of 1031 Exchange NNN Properties in over 30 states.

1031 Navigator is a service of Andrus & Morgan Co., a national commercial and investment real estate brokerage specializing in passive income investments.

For a free, no-obligation 1031 Exchange NNN Property Strategy session for your 1031 Exchange visit:

www.1031navigator.com

1031 Navigator - Fun Visual Quickie

I am a visual person.  I love quick and to the point visual overviews. Here is one we had fun making for 1031 Navigator.

This is a quick visual overview of the passive income properties we sell and the lifestyle they enable.

Can my attorney do my 1031 Exchange?

Beware of advice like this. https://twitter.com/WORLDBESTLAW/status/659204367224967168

The issue is not the tweet but the actual article which states:

An attorney is such a “qualified intermediary”. A 1031 lawyer will prepare your 1031 documents and will facilitate the entire tax free transaction. It is very important that a professional such as a Lawyer facilitate the transaction because firstly if any mistake is made on the transaction or the paperwork with the transaction that needs to be filed with the IRS you will lose your tax free status. Also, the IRS regulations state that the money received from the sale of your current property must not be “touched” by you as the owner. It must go directly to the “qualified intermediary” who will then provide the funds for purchase of the new property. The mechanism of a 1031 exchange is quite complex however by utilizing a Lawyer to facilitate the transaction is a very efficient and cost effective way of performing the 1031 tax free exchange.

Let's be clear.

Attorney's can act as 1031 qualified intermediary.

Just don't use your attorney.

Treasury covers this in Reg. 1.1031(k)-1(k)(2).

Patrick Harrigan, President/COO and a Certified Exchange Specialist at Gain 1031 Exchange Company, LLC covers this really well here:

The Role of the Qualified Intermediary in a 1031 Exchange: Who Can Audition?

This is what he says:

The Treasury Regulations state that someone who has acted as the taxpayer’s employee, attorney, accountant, investment banker, real estate agent or broker within two years prior to the date of the closing of the sale of the relinquished property is the agent of the taxpayer and is disqualified to act as the intermediary for that taxpayer. This means a seller of property cannot have their attorney, real estate agent, etc. hold their proceeds if they intend to complete a 1031 exchange. Also disqualified are all attorneys in the same firm as the seller’s attorney and any real estate agent in the same brokerage as the seller’s real estate agent. The regulations then proceed to state two exceptions to the disqualification of an agent.

Exception 1 The regulations except out services that are routine financial, title insurance, escrow or trust services performed by a financial institution or title insurance company. Thus, those businesses do not become an agent of the taxpayer based on their routine activities and are allowed to act as intermediaries.

Exception 2 The regulations also except out services performed by the agent “for the taxpayer with respect to exchanges of property intended to qualify for nonrecognition of gain or loss under Section 1031.”

The best bet is to hire an unrelated 1031 Intermediary company like Asset Preservation or Starker Services.

Any extra work to do this is sure to be less than that of an IRS challenge or a voided 1031 exchange.

Put $7,967.31 in your pocket!

Learn about how a guy got paid $7,967.31 when he did his 1031 exchange.

BONUS: Find out how to do a 1031 exchange for FREE.

Find out How

Wounded Warrior - Proud to Support

We recently closed a small 1031 Exchange Replacement Property retail deal in Denver. As a way of saying thanks to our clients for the business we give them an option of making a donation on their behalf to a cause of their choice or doing a normal closing gift like Wine of the Month or dinner etc.

This client chose to support The Wounded Warrior Project.