SFR with a 20-year NNN lease where you hold title. Has anyone seen this?

Question

Hi all, I'm posting to get honest feedback from experienced investors.

A lot of investors I talk to are in the same spot. They're tired of active landlording (tenants, repairs, turnover), but they don't love the trade-offs of passive vehicles like DSTs, where you hold a beneficial interest instead of title and the sponsor controls the exit.

We're working with a structure that sits somewhere in between:

• The investor buys an individual single-family home and holds 100% title
• The home comes renovated and tenanted, in a prime market
• CapFree acts as the long-term tenant under a triple net lease of up to 20 years, covering property taxes, insurance, property management, and HOA fees
• Routine repairs are covered up to a cap (the investor is responsible above it), and the lease terms spell out the details
• The owner can sell at any time, subject to the lease terms

The investor buys an individual single-family home and holds 100% title

The home comes renovated and tenanted, in a prime market

CapFree acts as the long-term tenant under a triple net lease of up to 20 years, covering property taxes, insurance, property management, and HOA fees

Routine repairs are covered up to a cap (the investor is responsible above it), and the lease terms spell out the details

The owner can sell at any time, subject to the lease terms

Some questions I'd like your input on:

• For those who've used DSTs for 1031 exchanges: what frustrated you most about the structure?
• Does a long-term NNN lease on a single-family home appeal to you?
• What would you want to see in the lease or the operator's track record before trusting a model like this?

For those who've used DSTs for 1031 exchanges: what frustrated you most about the structure?

Does a long-term NNN lease on a single-family home appeal to you?

What would you want to see in the lease or the operator's track record before trusting a model like this?

Happy to answer questions in the comments.

Harvey Levin · Answer

it can be. what is your NNN lesse for 20 years guaranteed with?

Harvey Levin · Answer

there was a company in Ohio doing something similar. i an not sure if they are still around. it sounds like more of a master lease situation by the company selling the house.

Ashish Acharya · Answer

Masha, I think the interesting part of this structure is that you get some of the operational simplicity of a NNN investment while still holding the actual property.

The first things I’d want to understand are the lease terms, tenant credit, rent escalation, renewal options, default provisions, and exactly what the investor is still responsible for. A 20 year lease can be attractive, but you are also committing a lot of the investment’s future economics to one tenant and one lease.

I’d also look carefully at the exit. If the owner can sell at any time, what happens to the lease on sale, and how does that affect the pool of buyers and the property's valuation?

There is a tax angle here too. Because the investor owns the property directly, they are still dealing with depreciation, basis, and the eventual tax consequences of a sale. The fact that the tenant is paying property taxes, insurance, or other expenses under a NNN lease does not make the tax side disappear.

If the property is held for investment, I’d also want to understand how a future sale or 1031 exchange would work before committing to a 20 year lease.

For me, the question would not just be whether the structure is more passive than traditional landlording. It would be whether the lease, tenant, purchase price, tax profile, and exit value make sense together. Happy to connect!

Masha A. · Answer

Absolutely. I think those are all fair points, and that’s exactly why we’re focused on making the lease terms and economics very clear upfront.

The 20-year lease, annual 1% rent escalation, tenant obligations, R&M cap, default provisions, and sale/transfer provisions are all defined contractually. The investor still owns the actual property, so they retain the real-estate upside and can sell subject to the lease.

And I agree—the investment needs to make sense as a whole: purchase price, lease, tenant, tax treatment, and exit. That’s ultimately what we want investors to evaluate rather than simply selling it as a “passive” product.

Masha A. · Answer

Fair questions, and I appreciate you digging into the structure.

On repairs, costs above the R&M cap stay with the owner because they own the house. The important part is that the R&M cap itself grows 3% every year on a compounding basis.

On rent, we don't use the word “guaranteed,” but we are obligated to the terms of a long-term lease, which provides an additional layer of contractual protection for the owner. We also hold 3% of our initial fee in reserves as an additional protection.

I understand why it may sound similar to lease arbitrage, but the structure is different. What we're doing is a patented
net-lease structure, somewhat similar to a triple-net lease in commercial real estate. The investor owns the individual home and holds
the title; CapFree is the long-term tenant.

One of the things I think is particularly interesting is that the net lease payment increases 1% every year on a compounding basis,
regardless of whether we're able to increase the underlying rent or whether the property experiences a long-term vacancy.
That obligation is part of the lease.

We think that creates a strong alignment of interests. We want the property to perform, we want the tenant to be happy,
and the owner ultimately owns the house and benefits from any increase in its value.

So it's not really about eliminating every possible expense or risk. It's about creating a structure where the investor
keeps direct ownership and the potential real-estate upside while transferring much of the day-to-day rental responsibility to us.

Bill B. · Answer

Are you covering turnover costs if they run $5-$10k?

Who’s guaranteeing the rent to the owner? Are your companies executives in a position to personally guarantee the payments? (After all I could sell a property the same way and as soon as it became unprofitable my company (for just that property.) declares bankruptcy.

It sure sounds exactly like lease arbitrage that’s been kicking around the last 5-10 years in STR market and 20+ years in LTR.

Do the owners get to increase rent to market rent every year? Do you promise no decreases in rent? I’m just trying to find the owners upside. I assume you pay rent on time even if the Tennant doesn’t pay, so that’s an upside. But honestly just using a PM means I spend less than an hour per month, and most of that is accounting which wouldn’t go away.

More power to you. If you’re charging market prices and paying personally guaranteed rent it should be attractive to someone but there wouldn’t be any “profit” to pay you for finding and managing the tenant and the vacancy. Good luck.

Masha A. · Answer

Not sure what the Ohio company is doing, but what we’re offering is a completely new concept.

A lot of the investors I speak with are facing the same challenge: they’re tired of active landlording—tenants, repairs, turnover, and the day-to-day management that comes with owning rental property. At the same time, they don’t necessarily love the trade-offs of passive investment vehicles like DSTs, where you own a beneficial interest rather than direct title and the sponsor typically controls the exit.

We’ve created a structure that sits somewhere in between.

You get the benefits of owning a rental property without taking on the traditional landlord role—while still holding the title.

• 100% direct ownership: The investor purchases an individual single-family home and holds title to that specific property.
• Renovated and tenanted: Each home is carefully selected in a prime market and comes renovated and leased.
• CapFree is the long-term tenant: CapFree covers property taxes, insurance, property management, and HOA fees, according to the lease.
• Repairs are clearly defined: Routine repairs are covered up to an agreed cap, with the investor responsible for costs above that amount.
• Flexibility: The owner can sell the property at any time, subject to the terms of the lease.
• Real estate ownership: Unlike a structure where you simply own an interest in a larger investment, you actually own the individual home.

To me, that’s what makes this so compelling.

It’s a new way to own single-family rental real estate—combining direct ownership and control with the convenience investors are looking for today.

It’s designed for investors who want to diversify into carefully selected, institutional-quality single-family homes without taking on the traditional headaches of being a landlord.

If you ask me, it’s a pretty genius structure.

Harvey Levin · Answer

lol

SFR with a 20-year NNN lease where you hold title. Has anyone seen this?

SFR with a 20-year NNN lease where you hold title. Has anyone seen this?

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