People are often intrigued by hearing about STNL NNN but what does it mean? What kind of returns can you get? What is an active versus passive investment?
Active investments tend to be real estate asset classes where you have to work and deal with headaches for yield. Those properties take up so much of your precious time and life force where you are dealing with constant problems instead of creating amazing life experiences and memories for yourself and your family.
Examples are: Residential houses, 2-4 unit multifamily, mobile home parks, large apartment buildings, storage facilities, office buildings, hotels, etc.
These properties can have higher returns for active yield but you have to work for it and those additional returns the investor hopes for might be theoretical and they may or may not materialize and you deal with a bunch of headaches for nothing.
Then why do investors often choose these types of investments? They might have a skill set and personality where they do not mind a certain asset class even if there is very high work levels involved. They may also not have the capital to buy more passive type of investments like a STNL NNN property. For example, someone could buy a house to rent for maybe $40,000 down on a $300,000 property. With NNN STNL for good locations you are talking minimum $2 million and really $2.5 million and up properties. So to get going you really need $750,000 to $1 million down. As you can imagine for some people that is out of the realm of possibilities so they have to start out with other asset classes with smaller investments and deal with the headaches and hope as they get older their net worth and liquid increases to where they can purchase STNL NNN properties.
Someone 25 years old to 30 years old might be more in wealth creation phase and looking for really high yields and will take on a headache and their net worth might be $500k, as opposed to a very high income earner at their job or business whose net worth and liquidity is much higher. At much higher liquidity and net worth a person can live off of a much smaller yield.
Example: someone investing $200k with net worth of $500k even for a headache property with 15% return could not live well off of $30,000 a year.
Conversely someone with $5 million net worth could invest $2 million at a 10% overall return for passive with mortgage paydown and live off of the investment. So as people’s net worth and liquidity changes and they are financially free, the strategy with money often changes. It becomes more about how the money is made (headache factor – active versus passive) and keeping the money safer in a stable investment with less fluctuations to the cash flow. As net worth increases investors tend to want safety and outpace normal inflation.
So the investor has to decide what is most important to them— time and peace versus max yield. I know for myself personally I want peace of mind and free time to enjoy my ideal life as I call it. If getting higher yield with active type headache investments make me miserable, then it’s not worth it for quality of life. People love STNL NNN for passive investing. Owning real estate is like stocks but with tax benefits and stability. Stocks tend to have little to no tax benefits and can be very volatile. STNL NNN has set rents by investment grade tenants so no matter what the economic cycle you can model out your income stream.