Net-Lease Properties: Alternative Investment that Keeps Giving

By Marilyn Kane, CEO, Iridium Capital

When we speak to investors about alternative investments, that is, not stocks or bonds, there is generally a hesitancy to delve into alternatives if one does not feel they have a level of expertise. This is particularly true when it comes to real estate. Everyone has heard the stories of how either someone lost their shirt on a speculative real estate project or how developers with a lot of cash and backing continually hit it big! The reality is that a new investor in real estate can enter into a world of safe investing with clear understanding and corporate-backed returns. Sounds like a sales pitch?

As a new investor, if you were told:  how would you  like to be sent regular monthly rent, have your rent  surpass your mortgage payments, you won’t be responsible for paying taxes or insurance premiums, and  you won’t have to worry about maintaining your property or worrying about the roof or pavement … you may think that’s a bunch of malarkey! But welcome to the world of net-lease investing. There are some criteria in purchasing that add all the assurances needed to enter this realm of real estate. Stick to a single-tenanted building with a credited corporation as tenant with that parent company guaranteeing the rent. Be sure there is no language such as “the Landlord is only responsible for roof and structure”… if that’s in the small print, this is not a NNN property but an NN, or Modified NNN, property … there is no need to settle for that potential headache.

Now the question comes up about location and that old adage we all know … “Location, location, location”… it’s just not a crucial component when it comes to net leases. These successful and profitable corporations have spent a great deal investigating a new locale and they know exactly where they want to be, based on their own sophisticated criteria. They choose a location well and the new owner of that site will benefit from that corporate decision. With net-lease properties, since an owner does not need to regularly inspect the condition of the building and the land, the proximity to the owner’s residence or business is not as important. The beauty of this net-lease structure is that the property and eventually the properties — as an owner adds to her portfolio — can be anywhere across the country. With a long-term lease in place the property owner can have confidence that the rental checks will come in regularly and that a monthly “payday” is something they can count on.

With the guidance of a good tax specialist, the owner can achieve another level of sophistication and accrue a greater “after-tax” return by utilizing a skilled engineering firm who will employ methods of cost segregation and accelerated depreciation to the investment for even greater returns … making the net-lease equation an even more substantial and intelligent inclusion in a diversified portfolio.