Absolute NNN lease

[Daniel Stack]

Newbie to Commercial RE Investing...

What are the reasons, if any, that someone would purchase a commercial property that has national-brand client with a 15 year Absolute NNN lease IF your monthly debt service is slightly less than the monthly rent (for the first 5 years)?

Is it merely for the tax benefits?

[Ronald Rohde]

Quote from @John McKee:

On an absolute you won't get any depreciation because you don't own the building.  The only thing you can write off is the Interest on the loan.  A lot of investors will 1031 into an absolute because they would like to trade up their existing equity.  Even if it doesn't cash flow as much initially they will own an asset that is worth more.  Other investors just need a place to park their cash and like the passive nature of it.  I own one of these but it did it with all cash.  The rent bumps are small so these assets tend to be traded once every 10 years to capitalize on the equity of it.   

I'm no CPA, but i don't think thats right. absolute net lease does have depreciation, maybe you mean ground lease has no depreciation. Land doesn't depreciate.
There are plenty of reasons to buy these assets, but the number of buyers has gone down, thats why you see the WAG and Sherwin Williams sitting for months now. 


If you're 1031 trading in, your basis may only be $500k, so deal cap rate is a 5, but your internal cap is 15...