Wealth Managers Looking Again at Conservative Long-Term Leased Investment Real Estate
As the Wealth Managers of the world continue the struggle to keep investment portfolios afloat, conservatism is now the Holy Grail.
More and more managers are taking a closer look outside of the realm of stocks, bonds and derivatives at good old bricks and mortar - real estate.
One particular type of commercial real estate investment - net-leased properties are getting a great deal of attention.
This asset class is being recommended to their Qualified and Accredited customers as a vehicle to not only achieve long term gains but as an asset that can be owned fee simple.
Too many clients that like to have real estate in their portfolio's instead purchased real estate stocks and are now being killed by the drop in those stock prices.
But purchasing a fee simple net-leased property assures the individual that his or her investment is based mainly on the rental receipts.
And the barrier to most professionals purchasing a fee simple property, that is, the time and expenses of management, are not a factor in net-leased property investments.
The tenant pays the expenses, maintains the property and sends the owner a computer check the first of the month.
Let's take a closer look at this type of commercial investment property.
When you are buying a property in fee simple it means that you own it, not you along with hundreds of others in some type of real estate investment fund, or a REIT stock or a TIC investment (Tenant In Common) where others are making decisions for you.
What types of properties are these? They are a CVS drug store, a Family Dollar or Dollar General store, a bank branch, an Advance Auto store and many others.
These are located all over the U.
S.
in great locations.
The investor is buying not only the land long with the bricks and mortar but also the lease with the occupying tenant.
These leases generally are for newly constructed properties and range in length from 10 years to 25 years and, in the vast majority of cases, are corporately guaranteed.
A close look at these corporations will find that most of them are doing very well in this troubled economy and are truly credit tenants.
The lease structure is either triple net or double net.
A triple net lease has the tenant paying for all costs of occupancy and double net has the owner ultimately responsible for roof and parking lot replacement and building structural integrity.
Thus, an owner has very little, if any, time or duties invested in ownership.
The income is Net to the investor before debt service.
There are dozens of net-leased properties placed on the market every month and an investor giving serious consideration to this asset type needs to consult with a commercial / investment real estate professional.
Preferably one who will represent the interest of the buyer in a transaction.
A buyer should conservatively expect to receive an after-tax return of between 5.
5% and 6.
75% over a typical holding period of 10 years.
Individual returns will vary by the amount of equity and cost of borrowed funds, if any.
Expect the offerings to range in price from $800,000 to $6,500,000.
More and more managers are taking a closer look outside of the realm of stocks, bonds and derivatives at good old bricks and mortar - real estate.
One particular type of commercial real estate investment - net-leased properties are getting a great deal of attention.
This asset class is being recommended to their Qualified and Accredited customers as a vehicle to not only achieve long term gains but as an asset that can be owned fee simple.
Too many clients that like to have real estate in their portfolio's instead purchased real estate stocks and are now being killed by the drop in those stock prices.
But purchasing a fee simple net-leased property assures the individual that his or her investment is based mainly on the rental receipts.
And the barrier to most professionals purchasing a fee simple property, that is, the time and expenses of management, are not a factor in net-leased property investments.
The tenant pays the expenses, maintains the property and sends the owner a computer check the first of the month.
Let's take a closer look at this type of commercial investment property.
When you are buying a property in fee simple it means that you own it, not you along with hundreds of others in some type of real estate investment fund, or a REIT stock or a TIC investment (Tenant In Common) where others are making decisions for you.
What types of properties are these? They are a CVS drug store, a Family Dollar or Dollar General store, a bank branch, an Advance Auto store and many others.
These are located all over the U.
S.
in great locations.
The investor is buying not only the land long with the bricks and mortar but also the lease with the occupying tenant.
These leases generally are for newly constructed properties and range in length from 10 years to 25 years and, in the vast majority of cases, are corporately guaranteed.
A close look at these corporations will find that most of them are doing very well in this troubled economy and are truly credit tenants.
The lease structure is either triple net or double net.
A triple net lease has the tenant paying for all costs of occupancy and double net has the owner ultimately responsible for roof and parking lot replacement and building structural integrity.
Thus, an owner has very little, if any, time or duties invested in ownership.
The income is Net to the investor before debt service.
There are dozens of net-leased properties placed on the market every month and an investor giving serious consideration to this asset type needs to consult with a commercial / investment real estate professional.
Preferably one who will represent the interest of the buyer in a transaction.
A buyer should conservatively expect to receive an after-tax return of between 5.
5% and 6.
75% over a typical holding period of 10 years.
Individual returns will vary by the amount of equity and cost of borrowed funds, if any.
Expect the offerings to range in price from $800,000 to $6,500,000.
Source...