You could buy a NNN property that you don't own the land (leased land). In that case you can depreciate 100% of your investment (check with you tax advisor to make sure) and, because you are not buying the land, pay less overall. NNN is merely a method to show that the tenant is paying 100% of the costs of the property. If the owner of the property is responsible for something, then properly, the lease should be referred to as a NN or N depending on the level of responsibility. Beware that many times a property is advertised as a NNN when in fact the owner may be on the hook for roof, or structure, both, etc. That would make it something less than a pure NNN.
Typically a builder builds the building with the ultimate user/tenant already in place. The NNN lease amount is often determined by taking the cost of the building and the land an multiplying it by a factor, say 12%. That produces the lease amount. The going cap rate is then divided into the lease amount and you get the sale price. The builder makes money on the difference between cost and sale price. If the lease amount is calculated off 12%, for example, and the price was determined by an 8% cap, the builder would make a 50% return on the building. Do the math:
cost of building and land $1,000,000X12%= $120,000 rent NNN. $120,000/8%= $1,500,000 sales price. Builder makes $500K minus sales costs of course.
You may also be buying from a seller/user that wishes to lease back the property on a NNN basis (sale/leaseback). In many areas of the US owning the real property is not as profitable as leasing which can be determined by a lease vs buy analysis.
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Paul Sylvester, CCIM
Jun 2, 2009