In this video, Joel, Principal Broker, discusses the disadvantages of owning a single-tenant property.
Joel talks about who is responsible for the monthly payment if the property is vacant and what the cap rates are for this type of property.
Who is responsible for the rent/mortgage if the property isn’t occupied?
If the investor has a mortgage on the property, they will be making the full payment until they are able to release the property to a new tenant and they take occupancy and start paying rent
How many tenants occupy this type of property?
One of the disadvantages of owning a single net lease property is that you have one tenant responsible for paying the rent for the property. If and/or when the tenant decides to move from the property, the investor will have an empty building that is not producing any income.
What are the cap rates and down payment costs associated with this type of property?
Another disadvantage is that typically the cap rates are lower on single net lease properties and usually more money is required to purchase these properties. In addition to more money required upfront, the loan to value ratios requires a higher down payment. Since there is only one tenant that is paying rent the lenders typically want at least 35%, or more, down payment required to purchase this type of property.