nnn property pros and cons ? suggestions needed
I have been researching on various real estate investments strategies, so far I like the NNN properties and wondering if any one done it am share pain points and issues / risk involved ?
I.e.
rent increase period; usually long, 1 to 5 years
re rent is time taking, if current tenant leaves.
major structural damage etc if occurs
anything else ?
please suggest
Most Popular Reply
I've done 2 commercial deals. 1 was a NNN lease, the other was a NN lease. I was really attracted to the idea of all of the repairs and maintenance being the responsibility of the tenant. Plus I figured that dealing with businesses on 3-5 year leases would be cleaner and more streamlined than dealing with a family on a 12 month lease.
Overall my experience was positive. I definitely want to do more NNN deals in the future. The due diligence process on the purchase was intense. But I had a good real estate attorney and I learned along the way. It's not horribly different than residential. But it's different.
The biggest downside is that I struggled to find value add deals. Most of the NNN deals around me are already tenant occupied, offered at a 5-7% cap rate, with small built in rent bumps every year.
When you run the numbers on a lot of these deals you start to realize they are great for somebody just looking for simple steady passive cash flow and rent increases that keep up with inflation, but generally not ideal for somebody who is in a growth phase.