Why should I purchase a Triple Net leased investment versus apartments, single family homes, office buildings or shopping centers?

The number one reason why investors prefer Single Retail NNN properties is because you receive all of the benefits of owning real estate without any of the taxes, maintenance, management or insurance expenses to go with it.

Who is the typical Triple Net Lease investor?

The affluent, doctors, dentists, and accountants. Or any one with substantial wealth that wants the benefits of owning investment property without headaches that go with it.

What exactly is a tax deferred exchange?

Property owners are taxed on any gain from the sale of property. However with a Section 1031 Exchange- the tax on the gain from a sale is deferred in to some point in the future. When a property owner sells one or more properties and trades or exchanges it into another of equal or greater value, the capital gain can be avoided or postponed indefinably.

What is the benefit of exchanging vs. selling and cashing out?

By exchanging one can avoid the capital gain tax and have more money available for future investments.

What is the requirement for a valid exchange?

Simply put, the exchange must be like for like-kind investment. So it would be investment real estate for investment real estate.

What does not qualify for a valid exchange?

You can’t sell an investment property and purchase a house as your primary residence, invest in stocks or bonds.

What is an accommodator or qualified intermediary?

The proceeds from the sale of your property must be handled by an accommodator or qualified intermediary, not by you or someone representing you. This accommodator will hold the proceeds from the sale of your first property until you have closed escrow on your exchange property.

Must I spend all of the proceeds from the sale my property to qualify for the exchange?

To avoid all capital gains tax, you must exchange the equal amount of the sale equity plus the loan balance, minus your selling expenses from the down-leg property. You can however take some of the net proceeds out (also known as the Cash-Boot). You will pay the full capital gains tax on the Cash-Boot.

What is the up-leg property?

The up-leg property is simply, the property that you plan to purchase the exchange property.

What are the restrictions on completing the exchange?

From the time you close escrow on your first property also known as your down-leg property, you have 45 days to identify up to three properties. You must then, close escrow on at least one of them. From the time you close escrow on your down-leg property you have a total of 180 days to close on your up-leg property.

How is the value of one property measured against another?

Property values are measures by the strength of the tenant, the desirability where they are located and the length of the lease.

What is a Cap Rate?

The Cap Rate is the primary way investor's measure their return. Expressed as a percentage, the higher the Cap Rate the greater the return and therefor the greater the risk to the property owner. A Cap Rate in its simplest form is return on investment. The componets of the formula are Net Income ( NI ), the Property Value ( V ) and the Cap Rate ( C ). The calculation is very simple.

Net Income ÷ Value = CAP

NI ÷ V = C

The information provided is intended to answer basic questions that may arise.
If you have more specific questions we recommend consulting your CPA or Real Estate Attorney