High Crime Rate City and Triple Net Retail

5 Replies

Does anyone have any experience with a high crime rate area (70% above national average), and NNN retail commercial property? Would like to know what experiences you had to put up with, and if the investment was worth the risk.

Hello Shane,

Have 2 NNN QSR's in arguably higher than avg crime areas East Memphis, TN and Dearborn, MI. Both are brand name fast food businesses owned by 2 of the largest QSR operators in their field. Long term NNN leases with bumps built into the leases. They both do very well. People need to eat & fast food (esp with drive-thru) tends to be high demand even during pandemic times. Highly recommend the drive-thru aspect. Hope this helps. Cheers & best wishes.

David

Figure out what they have to pay to bail if they give up and close the store like Walgreens in San Fran, or the grocery stores in Seattle with their “hero pay tax”, I’m sure those woulda been considered ultra safe a year A year ago. 

I can’t imagine trying to talk someone in to renting a space that Walgreens bailed on because of theft. 

My principles are founded on dirt quality in good areas.

I don't want high crime areas or areas that are more rural in nature. I want to invest where the growth is headed, crime is low, incomes are good, taxes are reasonable, etc. 

People want to live where they perceive a high quality of life standard if they can afford it.

I like warm belt states that are more pro business. That's the best way I can say it without getting political.

If you do buy in a cold belt state try to stay away from NN leases as the roofs and parking lots tend to get beat up faster with the snow, ice, etc. You want tenants taking care of that with absolute NNN leases. In warm belt states with a roof warranty in place a NN with limited responsibility is typically not bad.

Over time the land dirt value can just be worth a lot more in a warm belt high growth area over a cold belt high crime area. So it's not worth whatever the higher cap rate to me to invest in an iffy area.

NNN unless doing value add is usually for people that already have very high incomes and wealth as with a strong suburban area in a warm belt state with a national tenant about 2 million price and 600k down with 50k closing costs is about entry level.