NNN or NN Commercial property Experience

[Princella Griffie]

Wanted to know if anyone has experience with NN or NNN commercial props. We have sold our residentials and are in the process of purchasing a Fortune 500 commercial prop that's a NN.

[Joel Owens]

TIC is ( tenants in common ). You have a TIC and then a DST ( Delware Statutory Trust ).

The DST's were created from a bunch of TIC failures within the last few decades.

TIC's can work IF there are a smaller number of investors. When you get into large TIC's with lots of investors that use debt it can get complicated. Unlike a DST the TIC members have voting rights. If there ever is a decision to be made with a property you can have infighting with capital call injections, placing debt for loan or refi, when to sell, etc. During this time the assets value can plummet because of stagnation between the investors.

The DST one person controls the ship.

1031 DST and TIC shares are easy to get into but very hard to get out of if you ever need to sell.

It can work sometimes if the proceeds are small like 500,000. With 500,000 you can't buy own direct for yourself really anything good in NNN. So you could own with 500,000 a fraction of a Wal-mart in good location that you could not afford with 500k proceeds to own 100% yourself.

What you give up is control. I mention to people if your net worth is say 3 million and you are putting over 1 million into a DST or TIC that can be a bad move as you are giving up control with a high percentage of the money you have. Yes you have voting rights typically with TIC but so do the other investors usually so the control is not there.

If the TIC is simply a small percentage of net worth like 500k in when net worth 10 million and make 1 million a year and the person just wants to get passive then they might be a fit.

DST's are heavily laden with front fees as high as 12% sometimes. The DST buys down the interest rate front loading mortgage origination fees.

Sometimes people can buy a retail condo for interest in a shopping center in a good area for the 1 million dollar range. Again in that situation the NNN investor is not typically the controlling declarant (majority owner) of the association so you lose some control over your asset.

There are no 100% answers just varying answers depending on the individual investors risk tolerance and desire for control. I hope your works out well for you. I have seen many TIC's implode over the decades. They can work sometimes but the operators of the TIC's really have to know what they are doing and pick the right properties with the right group of TIC investors so the synergy works properly for a chance at success.