How can I invest passively in commercial real estate?
NNN property investments are quite the sweet-spot for high net worth individuals who are seeking to dip into commercial real estate investing. Passive real estate wealth, starting with an absolute triple net lease through either a direct purchase, a 1031 exchange or to be set up for passive retirement investing, is achievable for qualified and accredited investors.
Frequently Asked Questions
General FAQ's
What are DMD’s (Double Money Deals)?
This is the NNN Invest syndication goal of looking for value add investments that in a 3 year maximum time span will double in value once stabilized.
What is meant by the term Dirt First?
At NNN Invest, we use this term to refer to valuing the investment of a property not just by the credit of the tenant of the lease, but more importantly in the long term, by the location and quality of the land.
What determines if a property is a dark building?
A dark building is a commercial building where the tenant no longer operates and might or might not still be paying the rent. It could also be a building that the tenant has vacated and no longer operates or has a lease on.
What are controllables in relation to commercial real estate?
In terms of commercial real estate, controllables are items that a landlord typically has some control over keeping in a certain budget (maintenance, property management fees, etc.) as it relates to CAM (Common Area Maintenance) expenses.
How do cumulative CAM caps work?
Cumulative CAM (Common Area Maintenance) caps are limits imposed on how much expenses the tenant pays can increase each year over their base rent. With cumulative caps, any unused amount typically rolls over into the next year. This means if expenses are allowed to rise 5% and they only rose by 3% that year, then they property owner could carry over 2% for a 7% rise in cost allowed the following year.
What is the purpose of accelerated depreciation?
This is a tax technique that allows you to break out certain real estate property components into shorter time frames than the standard commercial property depreciation of 39 years to help offset taxes on income that the property generates.
What is an Absolute NNN Lease?
An Absolute NNN Lease is when the landlord is completely passive with the property and the tenant pays for property taxes, insurance, and handles maintenance. The landlord sits back and collects mailbox money.
What is a 1031 exchange?
A 1031 exchange is a process by which a property owner can tax defer capital gains and tax depreciation recapture from the sale of their real estate property into another.
Why do you ask for a minimum of $200k on liquidity, and $2m for net worth, before engaging in an agreement?
To purchase a property directly with a good, sustainable location (as well as other factors), the net worth should be close to $3m including between $800k and $1m for the down payment. If you do not meet these minimums, you can inquire about our syndication options.
Market Rent
The market rent refers to the market value of a rental unit for lease based upon comparable rental rates for similar units in close proximity to the subject. Used to calculate value, cash flow, and potential loan amounts.
Limited Partner
In contrast to the general partner, a limited partner’s liability is limited to the extent of their share of ownership. In typical real estate syndication, a limited partner is a passive investor who puts in the capital.
Internal Rate of Return
The IRR is calculated based on all future anticipated cash flow, principal pay down of debt, and proceeds on the exit of a property.
Holding Period
The holding period is the amount of time the sponsor plans to hold the property.
Exit Strategy
This is how the syndicator plans to cash investors out of their investment in the future. This may be by selling the property, purchasing their shares, or refinancing them out.
Distributions
These are the funds paid out to investors. These profits may be paid monthly or quarterly or upon a successful exit.
Cash Flow
Remaining liquid profit after deducting operating expenses and any debt service payments.
Capitalization Rate
The cap rate. Calculated by dividing net operating income by the current market value of a property to determine an expected rate of return.
Active Investing
This is the opposite of passive investing. An active investor does all the work of finding, structuring, managing, and exiting investments.
Acquisition Fee
Compensation earned by the general partner in a syndication for sourcing, screening, arranging to finance, and closing on an investment asset.
What is an Accredited Investor?
This is an investor that typically has either:
- Earned income that exceeded $200,000 (or $300,000 together with a spouse or spousal equivalent) in each of the prior two years, and reasonable expects the same for the current year
- Has a net worth over $1 million, either alone or together with a spouse or spousal equivalent (excluding the value of the person’s primary residence)
Buyer Agreement
Why is there a 1% Fee?
As a premium service to buyers, we have a FEE MINIMUM. Listing brokerages often focus on a volume business model. At NNN INVEST we chose to focus on quality, helping buyers reach their investing GOALS.
Direct Ownership
Market Rent
The market rent refers to the market value of a rental unit for lease based upon comparable rental rates for similar units in close proximity to the subject. Used to calculate value, cash flow, and potential loan amounts.
Internal Rate of Return
The IRR is calculated based on all future anticipated cash flow, principal pay down of debt, and proceeds on the exit of a property.
What is an Accredited Investor?
This is an investor that typically has either:
- Earned income that exceeded $200,000 (or $300,000 together with a spouse or spousal equivalent) in each of the prior two years, and reasonable expects the same for the current year
- Has a net worth over $1 million, either alone or together with a spouse or spousal equivalent (excluding the value of the person’s primary residence)
Passive Partner
Limited Partner
In contrast to the general partner, a limited partner’s liability is limited to the extent of their share of ownership. In typical real estate syndication, a limited partner is a passive investor who puts in the capital.
Internal Rate of Return
The IRR is calculated based on all future anticipated cash flow, principal pay down of debt, and proceeds on the exit of a property.
What is an Accredited Investor?
This is an investor that typically has either:
- Earned income that exceeded $200,000 (or $300,000 together with a spouse or spousal equivalent) in each of the prior two years, and reasonable expects the same for the current year
- Has a net worth over $1 million, either alone or together with a spouse or spousal equivalent (excluding the value of the person’s primary residence)
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