industrial triple net lease, good deal or bad deal for owner?

In Leasing Property - Asked by Tom S. - Jul 18, 2009
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Davide P.
Pinole, CA

As the saying goes Tom, it's all relative. As owner of the property, you have the tenant to pay all the expenses that are described on the lease which means the rental income already includes paying all the bills. As an owner of the business you have to pay all the taxes, insurance, etc but maybe the lease rate is a great deal for the area? Maybe the owner of the property has taken steps to lower additional expenses (security, etc) and the NNN costs are very minimal compared to another location. It's all relative to what your needs are and what they cost compared to other locations.

Jul 18, 2009
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Paul S.
Glendora, CA

They can be a great deal for an owner because the tenant pays everything. The down side is of course is if the tenant gets in trouble and has difficulty paying. If you bought the property as a NNN investment you likely paid more for the building than it was worth because you were actually paying for a cash flow secured by a building. Now that the economy has slowed many NNN tenants find they are paying too much rent and are asking for reductions or leaving. If you bought the property for the cash flow, and your cash flow is less, then so is the property value in all likelyhood. Your equity could have easily dissappeared. If you own a building an you want to rent it out to a tenant NNN that is a different story. The NNN lease is not dictating the price of the building directly if you are not leasing it merely to create a sellable product. If you are, the lease and the "going" cap for that type of product will dictate the price. If you are just acting as a landlord a NNN lease is great because you don't have to do anything but collect the rent. That said you must also make sure things like taxes and insurance are being paid by the tenant in a timely manner.

Jul 20, 2009
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