Specialist · Pasadena, CA · Member since 2017 · 133 posts · 86 votes
It seems like a majority on this forum prefer multi-family rentals. From speaking with many previous landlords at meetups, they eventually hated managing it or paying steep prices for property managers. Some became private lenders and others preferred triple net commercial leases. What are your thoughts on multi-family vs triple net leases for cashflow?
Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
7y
The allure of MF is that you have a lot less exposure to major risk. You have lots of tenants so if one moves not a big deal
While it may seem like it would never happen, how do you think the folks that own the NNN leases for Sears or Toys R us or every other business that is now defunct are doing? It will take years to fill those spaces
While renting an apartment is easy, renting out commercial space is not. So really its all about how much risk you can tolerate.
For example: I owned a sweet little 3ksq ft building in the hottest neighboorhood in SF. I could of easily rented it for 15-20k/mo. But what would i do if the tenant went belly up? It would be months of no rent. So i chose to diversify my risk and traded into MF :)
Also, if you self manage MF it is not passive income - which can be important. While afaik, NNN Is always passive (nothing to manage) so these are tax questions that should be discussed with your cpa.
Investor · Houston, TX · Member since 2015 · 233 posts · 188 votes
7y
I don’t control any triple nets but do know some very experienced investors who do. Overall they really like both double and triple net leases and are actively pursuing more these days as multifamily deals become thinner.
Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
7y
The allure of MF is that you have a lot less exposure to major risk. You have lots of tenants so if one moves not a big deal
While it may seem like it would never happen, how do you think the folks that own the NNN leases for Sears or Toys R us or every other business that is now defunct are doing? It will take years to fill those spaces
While renting an apartment is easy, renting out commercial space is not. So really its all about how much risk you can tolerate.
For example: I owned a sweet little 3ksq ft building in the hottest neighboorhood in SF. I could of easily rented it for 15-20k/mo. But what would i do if the tenant went belly up? It would be months of no rent. So i chose to diversify my risk and traded into MF :)
Also, if you self manage MF it is not passive income - which can be important. While afaik, NNN Is always passive (nothing to manage) so these are tax questions that should be discussed with your cpa.
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
7y
When I had my software company in Ca we rented premises NNN for 20+ years, and they were not all that hands off. On three occasions the roof leaked-once all over our servers. Because there were restaurants there were also rats and mice to eradicate. And when the economy tanked in 2006 there were empty units in the plaza and some were empty for years and years. So while both have plusses and minuses; I'll stick with MF.
Specialist · Toronto, Ontario · Member since 2012 · 2k+ posts · 891 votes
7y
Absolute NNN you are literally hands off because roof and structure are covered by tenant. To me as long as your cap and term exceed 100 in other words 7 cap at 15 year term or 5 cap at 20 year term you will at least recoup your capital at the end of the term and worst case stuck with the building. During that time you are just collecting checks into your account.
But I think you need to figure out multiple exit strategies in case your tenant ends up leaving at the end of the term. Like refurbish the building for different use or demolish and redevelop. I think most investors would try to sell with about 50% left in term unless they have a better plan in place.
Multi family I think there is more work by the landlord. Especially if your are not 100% sold with your PM. You still have to micro manage somewhat and make decisions.
Commercial leases are more bullet proof than residential.