1031 - where to go next

[Kris Lindquist]

I may be selling small owner user building we've occupied and looking at where to put the proceeds. Broker is suggesting purchasing NNN lease single tenant properties - such as Wendy's, Starbucks, auto parts, gas station, etc. Anyone have opinion on those types of investments/properties? Pros/Cons? I have full time job, so want something that is pretty hands off, safe house for capital, with income/cashflow. Would medical office building be better? multi-family with management? I'm in So. Cal, but would most likely look outside of that area as prices are sooooo inflated.

Thanks for your thoughts

[Dave Foster]

@Kris Lindquist, @Linda West, Your question is two fold - What type of property to invest in for passivity.  And what sector to invest in for the best return.

NNN commercial (especially single tenant with national corporate tenants) and DSTs as @Taylor L. mentioned are going to be very similar in passivity.  The differences generally are going to be with a NNN you own the whole property, the leases are longer, and there will be probably some limited interaction with the tenant annually and a lot around lease renewal time.  

With a DST you own a fraction of a property (many times it is a fraction of one of the NNN properties mentioned above). Your only interaction is reading a statement and getting a check in the mailbox. And the life span is generally much shorter - 3-6 years. At which time you can again 1031 your % of the sale into another DST or back to bricks and mortar if you like the market. The 1031 works just fine with each of these types.

As far as sector goes both DSTs and NNNs will be available in all the types of investments you mentioned, medical, multifamily, retail, supply chain logistics, self storage etc.  It all depends on which region you want and what type.  Again, the 1031 flexibility will allow you to invest into any type of this real estate anywhere in the country.