Triple Net Investment Group Archives

Sole focus on NNN investment

26th December 2020 by Robert Gamzeh Leave a Comment

The Triple Net Investment Group is the pioneer in real estate advisory on nnn properties. The amazing platform provides you with advisory solutions on commercial real estate Sole focus on NNN investment. You can expect to get comprehensive consultancy on triple net lease advisory and investment services. If you are looking for nnn services, you need to get in touch with Triple net investment Group. It offers corporate guaranteed tenants to the 1031 Exchange Investors looking forward to more solid yields. While offering the nnn property services, the Triple Net Investment Group performs the objective and detailed analysis of the nnn properties in detailed format. For the buyers who wish to do the 1031 exchange, the Triple Net Investment Group can be a suitable choice.

No matter whether you are the first time investor having small nest egg or the seasoned REIT with the rigid capital placement requirement, the Triple Net Investment Group (triple net lease advisory) prides itself on committing time and resources required to ensure the client’s expectations which are generally exceeded. This way, long term working relationship is fostered. If you are thinking about the nnn investment, the nnn investment group can assist in deciding on the nnn properties to bypass the property management issues. The single tenant nnn incorporating the retail, medical and industrial properties would be a good choice. Single tenant nnn is the tenant who will be held responsible for the operating expenses, the taxes related to real estate.

Whether you are the third parry property owner having only a singular property in the portfolio, the four unit franchise wishing the cash to grow, the Triple Net investment Group can assist you. The demand for this real estate and 1031 exchange is increasing day by day Sole focus on NNN investment. You do not have to manage your own property; do not have to pay the insurance and the taxes since it is done by the tenants. The tenant will have to look into every aspect of property management like the roof repair, removal of trash, landscaping, electricity, taxes and many such aspects.

NNN Properties: The best option for 1031 exchange

22nd December 2020 by Robert Gamzeh Leave a Comment

With the great fluctuation in the money market, investors are looking forward to invest their money safely. In this recessional phase, it is tough to find predictable and stable investment mediums. However, smart investors know what to do. One of the finest choices is to spend on Triple Net Lease Properties which is termed as corporate bond but it includes the real estate investment. Leasing of the commercial real estate property is done in varied ways and one of them is under a net net net lease or NNN lease whereby a commercial leasing is done by paying the base rent, property taxes, insurance and common area maintenance charges to the owner. The process of leasing is carried out by commercial real estate attorney which offers Triple Net Lease services to make the entire process of leasing smooth. In the net lease or nnn, the tenant has to pay the base amount to the owner so that the owner clears all the expenses relating to property taxes and insurance charges. In the nnn properties, the tenant will agree to pay the real estate taxes, insurance charges and also the operating expenses of the building. For the buyers who wish to do the NNN best 1031 exchange, net leased properties are extremely attractive. Such services are offered by acommercial real estate investment company.

What are the steps to be taken prior to tax deferred exchange?

If you are intending to do 1031 exchange, you need to connect and get associated with the qualified intermediately who would assist you in exploring the options related to 1031 replacement. Once you have your property under contract and before you close on your property you will need to contact a qualified 1031 exchange agent and start the process. If you close on your property it’s too late to do 1031 exchange. 1031 Exchange will defer both the state as well as federal capital gains taxes that are otherwise associated with every sale of the investment property. Simultaneously, you need to evaluate the Triple Net Lease Properties for sale for 1031 exchange replacement.

Why triple net lease is highly regarded?

Triple net lease may be tailored towards the investor’s expectation of risk and reward since one chooses tenants with a different credit ratings. Then, there are only a few risks attached to nnn properties and the returns are also very high.

Why 1031 exchange buyers invest in zero cash flow deals?

18th December 2020 by Robert Gamzeh Leave a Comment

What are Zero Cash Flow Properties?

One of the least understood types of real properties in the net lease market is a zero cash flow. Zero cash flow deals, also known as “Zeros,” are designed in a way that all the rent paid by the tenant goes to the lender. With all the cash flow going to the concerned lender, the owner receives no income until the loan fully matures. Perhaps this is why these are named as ‘zero cash flow properties’. When the loan is paid off in full, the property is then owned free-and-clear of any debt. These leases are often structured as NNN properties or bondable assets, leaving the landlord with no management or maintenance duties. In most cases, it is the tenants who hold investment grade ratings, reducing the risk of default.

Zeros are bond like long term leases lasting for 20 years or the above. And the loans in these transactions are fully-amortizing and have terms matching the length of the lease. However, zero cash flow must be backed by investment grade rated credit (AAA to BBB) so that debt requirement can met.

Who Can Invest & Why?

Zero Cash Flow Deals are a great option for someone looking for a 1031 Exchange or real estate planning. They satisfy both 1031 and 1033 exchange replacement property needs of the investors. The big benefit is that these properties come with highly-leveraged loans, which are not given to the general public. These types of investments are also popular options for estate planning, trusts and pensions who wish to enjoy the income generated after the debt is paid off. But should you invest in these properties? There are many benefits of investing these real estate properties. We discuss here some key benefits:

Fully Amortizing Loan: Free and clear ownership upon the loan maturity and the flexibility to leave the asset unleveraged for greater cash flow or to refinance the same to extract the equity.
Ideal Option for 1031 investors: Zeros allow the 1031 investors to satisfy their exchange requirement for a replacement property of their choice and thus earn huge profits.
Estate Planning: Free and clear ownership of the real property upon loan maturity provides a source of long-term, unencumbered income.
Buy net leased property: Zeros provide opportunity to buy an absolute net leased property for a minimal amount of equity, because most zeros are bought with equity as low as 10 to 15 percent of the total value

Tax Benefits: Zero cash flow investment is a low cost way to obtain the tax benefits associated with ownership of real estate.
Annual Depreciation: Offer the benefit of an annual source of depreciation and interest expense that can be written off against the income generated other qualifying investments. The plus point is that accelerated depreciation can be achieved through cost segregation analysis.

Why 1031 exchange buyers invest in zero cash flow deals?

Zeros are really an ideal option to satisfy both 1031 and 1033 exchange replacement property needs. The pay down re-advance facility available with these sorts of real estate products allows 1031 investors to satisfy their exchange requirements for replacement property then, post-closing enables them with no additional cost to take up to 85%-92% of their cash out of the property for various other purposes. The 1031 exchanges and zeros can also be used to defer recapture and capital gain taxes for foreclosure and the sale of highly leveraged properties. A property owner may have refinanced their properties to a higher loan to value, and then chooses to sell that property. As part of a 1031 tax deferred exchange, he needs to meet their debt level as part of their 1031 exchange. So, zero cash flow may be the answer.

Zero properties are a very lucrative option in net lease market for long term estate building where cash flow is not currently desired. Once the debt is fully amortized, these kinds of assets offer significant potential residual value and bigger cash flows. These are ideal options especially for three types of investors: first is a buyer who doesn’t need current income; second may be an investor with a tax liability from a foreclosure or deed in lieu and third is an investor with a highly leveraged 1031 exchange, Tenant Credit Rating.

The Best Way to Successful Zero Cash Flow Transactions

Zero cash flow transactions are one of the most complex types of real estate deals and require a skillful broker who can find out the property as per investor’s need, who understands how to make the most of the tax consequences, and who can advise on long-term ownership of the property – Zero Cash Flow Transactions. At Triple Net Investment Group, we have assisted hundreds of clients in the purchase and sale of zeros and triple net leased properties. We deal in the 1031 exchange process, triple net, NNN properties, ground lease and sales lease back to name a few. We are the premiere source for all Zero Cash Flow Properties in Maryland, Washington DC, Virginia and all 50 states. We maintain a huge database of Zero Cash Flow Deals. Get in touch with for details!

Why should you consider our services?

Specialized firm that exclusively offers Triple Net and 1031 Exchange services
Have extreme and unbeatable knowledge, as well as experience of market scenario
Staff of highly qualified professionals who closely work along clients in order to achieve desired, Triple Net Property Investment goal
Relay of Corporate Tenant Credit Rating and most comprehensive retail news
Wide database of buyers, investors, developer and brokers of different regions
Tax-Deferred services that allow investors to reschedule the acknowledgment of Capital Gains Tax
1031 Exchange of Internal Revenue Code or IRC solutions for similar “like” properties
Provide safe and secure platform to investors and owners for maximized Triple Net (NNN) Investments

For additional information regarding Tenant Credit Rating, Tax-Deferred Exchanges and Triple Net Properties, please contact Triple Net Investment Group today.

What is NNN lease?

14th December 2020 by Robert Gamzeh Leave a Comment

The NNN lease is a lease used by many businesses to gain the most control over a property without purchasing it. This is a long-term investment option lasting for 5 to 50 years depending on your need. In this type of commercial real estate product, tenant or lessee pays the rent plus the insurance, taxes and maintenance and repair expenses. These types of NNN properties are much beneficial assets for large and medium businesses across the world. This is why they have become a popular tool of investment.

Benefits of NNN Lease-As a landlord, you have no management and maintenance responsibilities in this lease, because the tenant will pay all taxes, insurance and handle the maintenance of the building. You will have a better chance of having a long-term tenant and thus generating stable income. Because the tenants are usually well known companies, it is much easier to sell this type of leased property, if the landlord decides not to own the property. Net lease is one of the affordable net investments that give tenant more control over property and he has freedom to rearrange the set-up to suit his requirements.

Downside of the NNN Lease-There might be certain risks for the landlord in NNN properties. If he gives his building to the tenants who are in financial crisis, they may not make the repairs tasks needed, pay the insurance payments or pay the taxes. In this way, the owner of the building could be left to scramble to pay property taxes in the end. Another problem could be plumbing failure or roof replacement, which a bad tenant may ignore. Repairing task not done on time may lead to the damage of the whole building in the long run. So, make sure you give your property to someone with good credit history.

For additional information regarding Net lease, Downside of the NNN, Tenant Credit Rating, Tax-Deferred Exchanges and Triple Net Properties, please contact Triple Net Investment Group today.

1031 Exchange Properties

10th December 2020 by Robert Gamzeh Leave a Comment

About 1031 Exchange Investment Properties:

Since 1921 investors have been given the opportunity to defer the capital gains tax from the sale of a property by using Tax deferred 1031 exchange. Tax Deferred 1031 Exchange allows an owner of real property, the Exchanger, to defer the recognition of a capital gains tax normally recognized on the sale of real property, if the exchanger buys a like kind property of equal or greater value and uses all of its cash equity in the subsequent purchase.

Like kind nnn 1031 property exchange does not mean triple net properties to be exchanged for other triple net properties or free standing nnn single tenant retail property to be exchanged for another nnn single tenant retail property. There is no requirement that properties be similar in type or class. However, real property must be exchanged for real property. Like-kind propery is defined as property held for productive use in a trade or business, or for investment purposes, that is exchanged for property which is also held for productive use in a trade or business, or for investment purposes. Example, a vacant land which is held for investment purposes can be exchanged for retail property held for business purposes.

1031 exchange should be done through a qualified intermediary. A Qualified Intermediary is an independent third party to the transaction whose function is to prepare the documents necessary to create the exchange, as well as to act as the independent escrow agent for the exchange funds.

How much many can be saved through a 1031 Exchange for a next purchase?

Example: If an investor is selling a triple net shopping center for $1,000,000, and has a net adjusted basis of $500,000, the investor will have a gain of $500,000 upon the sale of the property. Current federal capital gains tax is 15% on the amount the property has appreciated in value. The investor will also pay a tax known as depreciation recapture at the rate of 25% for the amount the property has been depreciated during its ownership. In addition, there may be a state or local capital gains tax.
Many investors multiply the gain by 25% to get a rough estimate as to the amount of tax they might realize if they do not structure the transaction as an exchange. In this example the gain would be approximately $500,000. Accordingly, if we multiply this amount by 25% the estimated capital gains tax if this sale were not structured as an exchange would be $125,000.

Three methods for NNN 1031 Exchange Property Investments:

Identify three properties of unlimited value (Most Common Method)
Identify an unlimited number of properties whose aggregate fair market values do not exceed 200% of the value of the properties sold in the exchange
Identifies more than three properties and their aggregate fair market value is in excess of 200%, the Exchanger must purchase at least 95% of the value of the properties identified.

NNN 1031 Exchange Restrictions:

Exchanger has 45 days from the date of the sale of the first relinquished property to identify potential replacement property or properties; and a total of 180 days from the original sale date to purchase the replacement property or properties.
Exchanger must acquire replacement property of equal or greater value, obtain equal or greater debt on the replacement property, reinvest all the net proceeds realized from the sale of the relinquished property, and acquire only like-kind property.
Exchanger must own the investment property for at least one year before he can use it for 1031 Exchange.
Exchanger must initiate the 1031 process before the closing, once the closing occurs; it’s too late to utilize the 1031 deferred exchange.
Exchanger may use the vacation house or primary residence for 1031 exchange as long as the property is reported as a rental or business use on the tax returns for two consecutive years.

Advantage of NNN 1031 Exchange Properties Investments:

When selling real estate, if you sell and reinvest, you will pay income taxes on the realized gain. However, with 1031 exchange, you will defer the tax gains.
You may have management-intense rental properties and would prefer to transfer your equity to ease-of-ownership single tenant properties (coupon clippers) such as Walgreen Drug Stores, Wal-Mart, Post Offices, 7- Eleven, Office Depot, etc.
You may have been holding properties long after their appreciation has topped out. You can start rebuilding your equity by disposing of those investments and acquiring new ones.
You may have some non-income producing real estate investments, such as raw land. You could exchange this property for another asset that would not only give you cash flow, but also get you income tax deductions such as depreciation, which you did not have with your raw land.
This means that more money is available for acquiring your next investment. It can be regarded as a free loan from the government!
You may have owned a leveraged property long enough to have accumulated considerable equity. You now have an opportunity to exchange into a larger asset, and reposition your equity to your benefit or that of your heirs, without paying taxes. We highly recommend using qualified professionals that have experience in 1031 tax-deferred exchanges to guide you and ensure your compliance with government regulations.
With proper estate planning you can keep exchanging properties throughout your lifetime. Neither you nor your heirs will ever pay income taxes on the gains. By doing a tax-deferred exchange,you conserve your equity by not having to pay taxes on your net profits.

Disadvantage of 1031 Exchange Investments:

Exchanger will have a slightly lower depreciation schedule when acquire new properties. This is because the IRS will look at the new tax basis as being the same as the previous one, less the deferred gain.
Exchanger losses on the income tax return cannot be deducted if you exchange property rather than sell it. If you want to take a loss, simply call it a sale, not an exchange.

For additional information regarding nnn single tenant, Tax-Deferred Exchanges and Triple Net Properties, please contact Triple Net Investment Group today.

How to Invest in Single Tenant Properties?

6th December 2020 by Robert Gamzeh Leave a Comment

Triple Net Investment in single-tenant-net properties will prove a reliable form of income producing in real estate. Those who purchase NNN property often ignore the importance of location and rely heavily on the strength of Invest in Single Tenant, while the better investment includes a strong tenant in strong location. On the other hand, some are not able to find the right assets, which is another important aspect if want to buy NNN property. Low quality assets make a good sense, if purchased at severally low price. In the same way, if you are paying too much for real estate products, it would be not a good decision.

Another very important consideration to buy single tenant NNN properties is to find out-who is the right tenant? Well, in this highly volatile economic scenario, we recommend assets with strong tenant with no debt and good credit rating. A lease cannot be strong, if the tenant is liable for payments to some financial institutions or individuals. Consider the lease which is long term and allows you to pay rent in the contractually obliged manner. Select the one that is free from unfair or early termination clauses or renewal options. So, before choose any real estate investment, keep the above things in mind.

It is also very important to understand real estate ownership structure types before shelling out your money. There are so many types of real estate ownership, but we will suggest you free and leased fee ownerships. So, if you are looking to invest in single tenant NNN properties do consider the aforementioned suggestions; if you want earn high returns on your investment.

For additional information regarding nnn single tenant, Tax-Deferred Exchanges and Triple Net Properties, please contact Triple Net Investment Group today.

Top Benefits of Investing in 1031 exchange

2nd December 2020 by Robert Gamzeh Leave a Comment

Tax liabilities on the sale of the real estate property may be upto 35%, and even more than this under certain circumstances. The payment of income tax from the sale of real estate property considerably reduces your equity and cash position, which in turn impact overall ability to build your net worth by purchasing larger and more profitable investment properties. The 1031 exchange allows investor to sell one or more properties and defer the tax payment on his/her ordinary income, depreciation recapture or capital gain by one or more replacement or investment assets.

These days, many investors are making use of the 1031 exchange properties for a number of good reasons. These types of properties help them avail long term lease that becomes a source of stable income and equity growth. The best aspect of investing in exchange properties is that people can exchange non-income producing real estate for another real estate property that will not only generate income, but it will also help you defer tax. It means if you have bought a raw land, you can replace it with other lucrative business property that will generate huge income along with several tax benefits.

The 1031 exchange property is much popular investment option especially in the United States. People prefer investing their hard-earned money in exchange properties in order to build stable income and avoid different types of income taxes liable on the owners. Of late, prices for real estate investment products have heavily declined. Considering the increasing popularity of real estate properties, all leading banks are ready to provide you with huge amount of loans helping you buy real estate assets. Those of you, who are looking to invest money in the exchange properties, consult professionals who have good knowledge about 1031 tax-deferred exchanges to guide in the best possible manner.

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For additional information regarding nnn single tenant, 1031 tax-deferred and Triple Net Properties, please contact Triple Net Investment Group today.

What is sale Lease Back?

28th November 2020 by Robert Gamzeh Leave a Comment

A leaseback, also known as a sale-leaseback or sale and leaseback, is a transaction wherein the owner /seller of a property sells the property to an investor (Buyer) and then leases it back from the investor. In this type of property, there are is an agreement between buyer and seller allowing seller/owner to lease back the property at a future date, when it is comfortable to buy back for the seller. 1031 Lease Back will allow you to stay in your home and repurchase it at a future time when you can afford it. The type of property can be anything, right from residential or commercial real estate to equipment and vehicles.

A sale-leaseback is beneficial to both the buyer and seller alike. The seller gets a lump sum of cash quickly, while the buyer acquires a long-term lease property, that too at a lower than market price. Companies use a lease back property as a way to quickly raise up their capital and achieve a number of their other corporate objectives such as paying debt, funding growth, acquiring other business, or reinvesting their money into the current operations. This type of property can provide the seller with additional tax deductions. This is one of the most lucrative investment options that yield high return. But then there may be some associated risks and must be careful while investing in such assets.

Over the years, the sale-leaseback property has become very popular in the United States and many European countries across the world. Many businesses and individuals have realized the benefits of investing in such properties and this is perhaps the reason why most of the investors tend to choose this type of investment, when it comes to investing their hard-earned money in the commercial real estate. To know more about lease properties, just visit internet and extract all other details necessary for you – Triple Net Investment.

For additional information regarding nnn single tenant, 1031 Lease Back and Triple Net Properties, please contact Triple Net Investment Group today.

What is a Ground Lease?

24th November 2020 by Robert Gamzeh Leave a Comment

A ground lease is a long-term lease of land ranging from 10 years to 99 years in some cases. This allows the lessee to develop a piece of land. Ground leases are often commercial real estate products allowing tenants to build a business without the expense of buying the land. They normally allow tenants to make improvements like building a restaurant, supermarket or any other structure. The changes to the property, which help the tenant run his or her business, also increases the value of the land for the owner.

In a NNN ground lease, the property owner has the advantage of retaining ownership of the land, while earning stable income on the property without the expense of developing the land. During the lease agreement, the landowner and tenant decide on how much rent the tenant would have to pay to utilize the land. When the lease term is over, the land goes back to the original owner, that too along with the structure that has been built over the land, unless there are otherwise stipulated terms and conditions. – Lease Triple Net (NNN Investment Group)

The landowner not only take the the benefit of the rent from the lessee, but he/she can also capitalize on the improvements made to the property. For the tenant, the lease agreement serves as a comparatively low-cost alternative to buying land for business. As it is a long-term lease, the property owner has a tenant locked into a commitment for a long time. During this term of lease, the landlord cannot sell the land. In addition, any increase in the value of property will add to his/her income taxes.

For additional information regarding ground lease, 1031 exchange, NNN ground and Lease Triple Net Properties, please contact NNN Investment Group today.

What is Build to Suit?

20th November 2020 by Robert Gamzeh Leave a Comment

Build to suit in the real estate refers to a company that will construct a building to suit your space requirements. After construction of the structure, the owner of the property will lease the concerned building to you in lieu for the rent as agreed by you and your landlord. To put it simply, a build to suit lease is an agreement wherein a landowner offers to pay for the construction expenses on his land or building and then leases the property to tenant or lessee for a mutually agreed time period.

Many businesses today prefer to lease workspaces instead of owning them on their own, because it turns out expensive, if they own them. If you are now searching for affordable and lucrative real estate products, many companies are now offering the benefit of leasing you with a new building, tailored to your specific needs. Leasing an existing facility can increase your cost, if the lease is not properly structured or if the building does not suit your business in terms of layout and energy consumption, long-term business goals. So, be careful while leasing or buying a property for your commercial use.

While you choose to NNN invest in a build to suit lease project, make sure the structure improves your operational efficiency and successfully communicate the desired image of your company to employees, shareholders and customers alike. Select a financially strong developer who can provide you with services like lease structure, site selection, design and construction and property management. Whether it is an office, manufacturing or distribution facility, you can find different types of leases with nnndeals.com , your reliable resource for finding the real estate products at a much affordable rate

For additional information regarding NNN invest in a build, 1031 exchange, NNN ground, 1031 exchange investment and Lease Triple Net Properties, please contact NNN Investment Group today.

What is a zero cash flow?

16th November 2020 by Robert Gamzeh Leave a Comment

Also known as “Zeros”, zero cash flow deals are structured so that all the rent paid by the lessee or tenant goes to the lender. These types of properties are ideal investment option, if you are are focused on growing your portfolio but with the least risk. They allow investors to leverage investment grade credit rating of the tenants and thus allow purchasing property with as little as 10% down. Zero cash flow is a much beneficial investment, as it enables investors to cash out their gain and postpone tax recognition.

Zero properties are in fact long-term estate products in which cash flow is not currently desired. Once the debt is amortized, these type of real estate investments offer great potential residual value and attractive secure cash flows. Zeros are the most cost effective way of satisfying both 1031 and 1033 exchange replacement property requirements. 1031 exchanges and zeros are now commonly utilized to defer recapture and capital gain taxes for the sale of highly leveraged properties.

1033 investors who want to maximize the amount of cash they maintain after satisfying their 1033 replacement property requirement, they also use zero cash flow properties. Properly structured zero leases are like a bond to be backed by investment grade tenants (BBB- or better) with an initial lease term, which is longer than the time needed to fully amortize the debt on the concerned property. Zeros are now quite popular in the United States and many people are investing in zero offers and deals.

For additional information regarding real estate investments, 1031 exchange, 1033 exchange, 1033 investors and Lease Triple Net Properties, please contact NNN Investment Group today.

What are SNDA and Estoppels Agreements?

12th November 2020 by Robert Gamzeh Leave a Comment

An SNDA agreement is a contract wherein the main purpose is to clarify the relationship between the lender and tenant. As the very name indicates, it is the the subordination, non-disturbance, and adornments and is meant to address the rights between tenants and the landlords or investors. It has basically three major components, which include the followings:

Subordination means that the tenant agrees that its lease is subordinate to the lien of the mortgage. This is the case especially if the lease occurs after the mortgage. These kinds of agreements are often requested by a new lender to make all of the leases for the building, which is collateral to its loan, become subordinate to its mortgage. 2-Non-disturbance specifies that the lender will not disturb tenant’s possession and honor the terms of lease, if he/she forecloses and takes title to the building. 3-Attornment means the fact that if the lender forecloses and takes title to the building, it will make the lender as its new owner.

Talking about estoppels agreement, it is a document that mentions promises and conditions, both oral and written, made between the landlord and tenant. When a landlord sells or refinances a rented property, they often require that the current tenant signs an ‘estoppels agreement’. The aim is to clarify all verbal and written promises and written conditions between the current tenant and owner. Purchasers of such real estate products often require that the seller provide with the estoppels certificate signed by current tenant to ascertain the tenant’s rights to the property owner as well as owner’s obligation to the tenant.

Estoppels agreements signed by the current landlords and tenants prevent the new landlord and the current tenant from raising claims against one another against the promises and conditions between the former landlord and tenant. They inform the rental property’s new owner about each party’s obligations, and thus protect them from conflicts resulting from misunderstandings between them. As buying and financing rental property has become more complex as a result of new laws, codes, tenant rights, and individualized agreements between landlords and tenants, an estoppels agreement has become essential to provide security to both owner and tenant. Visit internet to know more about SNDA and Estoppels agreements.

For additional information regarding landlord sells, 1031 exchange, 1033 exchange, 1033 investors and Lease Triple Net Properties, please contact NNN Investment Group today.

Three Types of 1031 Delayed Exchange and How They Work

8th November 2020 by Robert Gamzeh Leave a Comment

The desire to avert or defer the payment of taxes incurred on the capital gains on property disposition is universal. While you cannot prevent paying your taxes, at least you can defer it, and this is what the delayed version of 1031 exchange of properties is all about. If you are still unaware of this 1031 exchange process, it is a property law in the United States Internal Revenue Code under Section 1031. It permits taxpayers to delay the capital gain, while they dispose off a property for investment, trade, or business purpose. The property under discussion could be anything, such as a vehicle, the trading of a player in a ball team, or a real estate deal. Talking about the latter, 1031 exchange real estate and 1031 exchange commercial real estate are the common ones among the 1031 exchange properties.

Types of 1031 exchange in brief

The section 1031 related to exchange of properties has been divided into various types, which include:

Simultaneous 1031 exchange: Permits the sale of relinquished property and the purchase of replacement property, simultaneously.
Delayed exchange: Non-simultaneous 1031 exchange of properties, which allows the entire property transaction to complete in 180 days.
Improvement exchange: Lets the trader to improve the replacement property through the proceeds obtained by selling the relinquished property.
Personal property exchange: Allows the trader to exchange personal property, which is further classified into depreciable property and non-depreciable property.
Reverse exchange: It enables the trader to buy replacement property before disposing off the initial property. The reason could be varied, such as for the maintenance work of replacement property, etc.

Delayed 1031 exchange process

The Delayed exchange allows the involved businesses or individuals to relinquish the initial property and buy the replacement property on different dates. Hence, the exchange needs not to take place on the same date, unlike the simultaneous 1031 exchange. It is also often referred to as “Starker Exchange”, “Deferred Exchange”, or “Like Kind Exchange”. The maximum permissible 1031 exchange timeline set by the Code and Regulations to complete the property transfer formalities is 180 days. However, it is important to identify the replacement property 45 days of the transfer of the relinquished property.

The delayed 1031 exchange process is a preferred alternative for traders who find it hard to perform 1031 exchange in real estate under simultaneous exchange, the reason being an extended period for transaction. It requires the interference of a third party that could help in all the involved aspects of property exchange including the sale and purchase of the property under consideration. In addition, the exchange firms also hold the proceeds from the relinquished property to use it later for buying the replacement property.

Three Types of Delayed 1031 exchange

As notified in the code, the traders can identify more than one potential replacement property in delayed exchange under any of the following 1031 exchange rules:

Delayed exchange under the Three-Property Rule: This allows identifying three properties irrespective of their current market values.
Delayed exchange under the 200% Rule: This is one of the three 1031 exchange rules and allows identifying as many properties as possible on the condition that their combined fair market value remains less than double the value of the relinquished property.
Delayed exchange under the 95% Rule: This allows the identification of any number of potential replacement properties irrespective of their combined fair market value, on the condition that the trader acquires 95 percent or more of the aggregate value of the relinquished property.

How delayed 1031 delayed exchange work?

The steps related to 1031 exchange requirements are as below

Property purchase and sale contract: The agreement should include a “cooperation clause” that asks the buyer to cooperate in the structuring of the transaction as a delayed or tax-deferred exchange. The third party facilitator plays an important part in converting this “sale” transaction into a 1031 exchange, using specific documents.
Documents for relinquished property exchange: Once done with the contract, the traders need to initiate the 1031 exchange process with the help of a 1031 exchange real estate or a 1031 exchange commercial real estate provider, as the case may be. The approached agency could assist better in preparing various important documents related to 1031 exchange of properties.
Closing the relinquished property: After the completion of documentation work, the relinquished property is conveyed to the buyer.
Relinquished property proceeds and forms: The intermediate exchange firm holds the proceeds from the relinquished property exchange and asks the seller to identify potential replacement properties within 45 days.
Property purchase and replacement contract: The trader identifies like-kind replacement property and signs a purchase contract with its owner. The contract should contain a cooperation clause
Documents for replacement property exchange: The 1031 exchange firm then prepares the requisite documents to fulfill the 1031 exchange requirements, which must be signed before the closing date.
Closing the replacement property: The closing should take place within the allowed 1031 exchange timeline of 180 days.

Summary: The delayed 1031 exchange of properties enables the businesses and individuals defer tax payment. Approaching a reputed 1031 exchange firm is advisable as they inform you of various delayed exchange types, suggest the preferred one, and assist in the 1031 exchange process.

For additional information regarding 1031 exchange commercial real estate, 1031 exchange, 1031 exchange firm, 1033 investors and Lease Triple Net Properties, please contact NNN Investment Group today.

What Are the 5 Types of 1031 Exchange?

4th November 2020 by Robert Gamzeh Leave a Comment

Are you finding it hard to pay taxes for your investment property, and are keenly searching for a reliable option to defer the same? If so, then it is high time that you opt for any of the 1031 exchanges. The 1031 exchange definition stems from Section 1031 of the United States Internal Revenue Code. It states that if you exchange any of your qualifying properties, it may keep you from paying the losses or capital gains due on upon sale till some time. Eventually, you manage to defer both the state as well as federal capital gains taxes that are otherwise associated with every sale of the investment property. The properties thus exchanged must be “like-kind”, which indicates the identical character or nature of the property, irrespective of quality or grade. Among the properties that do not qualify for 1031 exchanges, include bonds, stocks, LLC interests, inventory or trade stocks, and personal residences.

To get detailed 1031 exchange information, it would be worthwhile to know its five types, as given below:

Simultaneous 1031 exchange

As the name suggests, in this type of 1031 exchange of properties, both the practices – the selling of relinquished property and the acquisition of replacement property, take place at the same time. It is the original form of Simultaneous 1031 exchange, but at times, it may be difficult to follow, especially in the instances where the involved parties reside in different locations. Any such situation makes the property transaction a complex affair. Considering the nature of this 1031 exchange, only one party can involve actively in the transaction.

Delayed 1031 Exchange

It is the most common 1031 exchange that includes a simple swap of property between two parties. However, the chances for finding a person with the exact desired property are often bleak, which ultimately leads to delay in the transaction. This swap often takes place with the help of 1031 exchange companies, which handle the cash after the property is relinquished and uses this money to buy a replacement property for its client. Owing to the possibility of delay in this entire process, the involved parties are given a 180-day window. However, the replacement property needs to be identified well within 45 days of the transfer of the relinquished property. The role of 1031 exchange firms thus becomes more important, so as not to get the deal delayed more than the permissible time.

Improvement exchange

This 1031 exchange allows the parties to structure a transaction, in order to sell the relinquished property and use the proceeds thus obtained to gain the replacement property. The proceeds may also be used to improve the structure of the replacement property thus acquired. These changes may range from a simple repair work on the existing structure to a complex ground-up new construction. If someone gives you similar 10301 exchange information with the name of construction 1031 exchanges or build-to-suit 1031 exchanges, do not get confused, all these are the different names of improvement exchange. Due to intricate tax-deferred strategies in this form of exchange, it is better to seek the assistance of experienced 1031 exchange (Improvement exchange)companies for hassle free transaction.

Personal property 1031 exchange

Besides 1031 real estate exchange, which is common, the exchange of personal property is also a possibility. The last decade has witnessed an appreciable surge in the number of transactions taking place under personal property 1031 exchange. A major credit for this rise goes to the awareness among the small and big businesses as well as individuals, about the benefits they can get in income tax through this vital tax-deferred strategy. At present, of the total volume of transactions, personal property exchange alone accounts for around under 3%, which is appreciable. The popularity of this exchange is expected to proliferate in the next decade as well, as has been inferred by various research works. Just to add to your 1031 exchange information regarding personal property, it may be categorized into depreciable and non-depreciable. While the former one includes tangible personal property, the latter includes non-tangible property.

Reverse exchange:

In a unique case of 1031 exchanges, the involved people or businesses buy replacement property before they relinquish the initial property. This particular instance in the United States Internal Revenue Code is termed as reverse exchange. There may be varied reasons for the exchangers to opt for this method. These may include:

The desire of the exchanger to buy the replacement property, despite his inability to search for a customer for old property
The need for improvements in the replacement property
Inability to close the deal on replacement property, resulting in the apprehensions of loss of money deposits

Summary: Awareness of 1031 exchanges is important if you are looking forward to perform a property transaction. Proper knowledge five different types of 1031 exchanges in this regard are therefore worthwhile, perhaps profitable. (Awareness of 1031 exchanges)

For additional information regarding Awareness of 1031 exchanges, 1031 exchange, Simultaneous 1031 exchange, Improvement exchange and Lease Triple Net Properties, please contact NNN Investment Group today.

What exactly is a 1031 exchange and how it can benefit you

31st October 2020 by Robert Gamzeh Leave a Comment

In today’s society, even if your daily routine does not consist of dealing with routine Real Estate transaction, most people have heard of a 1031 exchange benefit. For some that have heard of 1031 exchange or maybe those that are not sure about its exact guidelines, here is a breakdown:

1031 exchange is a swap, exchange or trade of one business or investment for another
Although most exchanges are taxable, a 1031 exchange is tax exempt or have limited tax restrictions
There are no limit as to how many times you can do a 1031 exchange
The provision is only for business investment and property (primary place of residence are excluded, with some loopholes regarding vacation homes which will be explained later)
Most exchanges must be similar or “like -kind” but it’s rules are also very liberal; for example, you can exchange an apartment for bare land or as a typical 1031, which is exchange of one business investment for another
If you can’t find a property that suits your liking, you can do a “delayed” exchange. Basically, once you sell your property, a third party middleman holds the cash for you until you find another investment property to buy. This process is also called a Starker Exchange. Within 45 days of the sale of your property, you must find another replacement property (up to 3 potential replacement property are allowed according to the IRS as long as you close on one of them) and indicate in writing to the intermediary of your intention to purchase. One should also note that you have 180 days from the time you sell your property to close on your new property. If you have cash left over known as “boot” after the purchase of your replacement property, that earning is subject to be taxed because it is regarded as capital gain.
1031 exchange can be used for a vacation home that you no longer use as well and have converted it into a rental investment property. The key is to have a property rented for a good amount of time, preferably a year, before you decide to do the 1031 exchange.

For additional information regarding rental investment, 1031 exchange benefit, 1031 exchange, tax exempt, Improvement exchange, capital gain and Lease Triple Net Properties, please contact NNN Investment Group today.

10 most important things to do during the NNN Property due diligence period, or also known as feasibility study period:

27th October 2020 by Robert Gamzeh Leave a Comment

1) Hire a Real Estate attorney and make sure that the tenant can’t cancel the lease and they would be responsible for paying the rent if they assign or sublet. In addition, pay special attention to the assignment clause of the lease agreement and make sure that the tenant can’t assign to a smaller tenant and if they are allowed under the lease, they will remain liable for the rent payments.

2) Review the lease and be sure that the tenant is responsible for the roof and structure in addition to the tax, insurance and the common area maintenance.(feasibility study period)

3) Make sure that the tenant’s guarantee is good and it will be transferred at the time of closing. Review tenant’s financials, credit ratings, store sales, earnings before tax (EBT) and be sure the rent to sales ratio is healthy.

4) Review the phase 1 report. It is important to ensure that the site is environment-friendly and free from hazardous materials. If phase 1 report suggests phase 2 report, it’s very Important to get the phase 2 report done and make sure there are “no further action required” language in phase 2 report.

5) Review the Title Insurance Policy and make sure the seller is the same seller who owns the property and the same name is on the lease .Review the easements and exceptions on the title and that the title is clean.

6) Review the “Alta Survey” and make sure there are no encroachments on the property and also if there are any easements, they are to the advantage of the property owner and not to the disadvantage.

7) Review the tenant’s Insurance Certificate and request the buyer’s name to be added to the tenant’s insurance as additional insured before the closing.

8) Review the “Certificate of the Occupancy” and be sure there are no violations on the property and that the property is not under any city future development project through the zoning office.

9) Inspect the building structure and the roof and make sure the building is structurally solid and the roof does not have any leaks as well as the property is well taken care of.

10) Make sure to get the assignment of the lease as well as the “Estoppel Agreement” before going to the final step, which is the property closing.

To find out more about how to invest wisely from NNN deals, please contact our highly experienced associates at Triple Net Investment Group- a leading Commercial Real Estate Investment Firm.

For additional information regarding Estoppel Agreement, Alta Survey, 1031 exchange, NNN Property due diligence period, feasibility study period, NNN Property due diligence period, Insurance Policy and Lease Triple Net Properties, please contact NNN Investment Group today.

10 Things That Makes a NNN Property a Good Investment

23rd October 2020 by Robert Gamzeh Leave a Comment

10 Things That Makes a NNN Property a Good Investment

NNN Properties, also known as ‘Triple Net’ is one of the most popular property types in commercial real estate. NNN Properties are usually single-tenant properties leased to solid tenants (big corporations or businesses) with high credit ratings. In this type of property, tenant is responsible for all real estate taxes, insurance, and maintenance tasks. The triple-net deals appear to be the ideal investment, as they are very lucrative properties with no management responsibilities, and offer a long-term lease to a quality tenant, stable cash flow, attractive financing, and the huge tax benefits for the real estate investors.

Here are some crucial considerations you need to look into while investing in NNN properties:

1) Location, location, location- This famous saying holds true for the commercial NNN properties. It’s the number one rule in real estate, and it’s often the most overlooked rule. Make sure the investment property is located in an economically stable and growingarea, near entertainment, shopping, other national tenants and near public transportation, health care and jobs and is easily visible and accessible for employees and clients. A good location will enable tenants to stay in the same location for a long period of time and pay higher rents when the lease or the options expire.

2) Tenant- While investing in an NNN property, make sure that the tenant is financially strong and can continue paying the desired rent on time. The lease is NNN with roof and structure covered by the tenant , there is no cancellation clause in the lease and the tenant’s guarantee is good. Make sure to do a solid background check and look into the company’s credit ratings, earning before tax (EBT), store sales and rent to sales ratio. Find out how long the tenant has been in business and how much rent it can afford to pay at max. If the tenant is making money, it will stay there for years and continue paying the rent increases on time without any delay or dispute with the landlord.

3) Return– Most NNN properties promise high return on investment. However, it is important to analyze return as well as risks that come with these sorts of properties. Remember, the higher the risk, the higher the return. Always estimate the expected cash on cash return before and after tax to be sure that the deal makes business sense and the return is decent with risk associated with the investment.

4) Population- The income of a business depends on employment and population factors. Check and find out if the population is decreasing or increasing; are there enough people with good income to support the store business? This will help you determine the stability of the tenant and the income from it.

5) Employment- It is important for an investor to research and find out if there are enough employment and work opportunities in the area before investing. Buying an NNN property in an area with inadequate employment prospect could be a complete deal breaker for the real estate investors.

6) Income- As a wise investor in commercial nnn properties, you also need to check the income of people living in that particular area (ie; can they pay for the products and services the tenant and/or company is offering?) If yes, then it is well-worth making a investment decision in the triple net properties located in that region.

7) Visibility and Accessibility of the Site- As a wise investor, you must consider the visibility of a site and it’s location; Can the costumers and drivers see the site and enter the parking lot with no issues? The site must also be visible and accessible for employees and clients; Is the property accessible and visible from the main road? These are important questions you may want to consider prior to your investment.

8) Car & Foot Traffic Counts- Foot Traffic Counts is true that the more people see the site, the more business a tenant can expect. Visibility to a large number of people leads to greater promotion and advertisement of a business (tenant). So take car and foot traffic as a key consideration while investing in NNN property.

9) Building Structure, Roof and Parking- Inspect the Building Structure, roof and the parking lot and make sure there are no signs of structural damage, roof leaks and there are enough parking spaces for the customers and employees as well as the parking lot being in good shape. The lease must state that the tenant is responsible for maintenance of the roof, structure, and the parking lot. (Building Structure)

10) Clean Site and Title – Clean Site is important to ensure that the site is environment-friendly and free from hazardous materials. It is advisable to invest in green buildings to ensure safety of employees and customers. Prior to purchase, review phase 1 report, the title and the deed and make sure that the seller and property owner are the same on the lease and the title and that there are no liens and no encroachments and lastly, don’t forget to review the easements and exceptions on the title.(Clean Site)

To find out more about how to invest wisely from NNN deals, please contact our highly experienced associates at Triple Net Investment Group- a leading Commercial Real Estate Investment Firm.

For additional information regarding Building Structure, Clean Site, 1031 exchange, NNN Property due diligence period, Foot Traffic Counts, commercial nnn properties, Insurance Policy and Lease Triple Net Properties, please contact NNN Investment Group today.

What you need to know about 1031 Exchange:

19th October 2020 by Robert Gamzeh Leave a Comment

Since 1921 investors have been given the opportunity to defer the capital gains tax from the sale of a property by using Tax deferred 1031 exchange (about 1031 Exchange). Tax Deferred 1031 Exchange allows an owner of real property, the Exchanger, to defer the recognition of a capital gains tax normally recognized on the sale of real property, if the exchanger buys a like kind property of equal or greater value and uses all of its cash equity in the subsequent purchase.

How much many can be saved through a 1031 Exchange for a next purchase?

Example: If an investor is selling a triple net shopping center for $1,000,000, and has a net adjusted basis of $500,000, the investor will have a gain of $500,000 upon the sale of the property.

Current federal capital gains tax is 15% on the amount the property has appreciated in value. The investor will also pay a tax known as depreciation recapture at the rate of 25% for the amount the property has been depreciated during its ownership. In addition, there may be a state or local capital gains tax.

Many investors multiply the gain by 25% to get a rough estimate as to the amount of tax they might realize if they do not structure the transaction as an exchange. In this example the gain would be approximately $500,000. Accordingly, if we multiply this amount by 25% the estimated capital gains tax if this sale were not structured as an exchange would be $125,000.

Three methods for NNN 1031 Exchange Property Investments:

1) Identify three properties of unlimited value (Most Common Method)

2) Identify an unlimited number of properties whose aggregate fair market values do not exceed 200% of the value of the properties sold in the exchange

3) Identifies more than three properties and their aggregate fair market value is in excess of 200%, the Exchanger must purchase at least 95% of the value of the properties identified.

NNN 1031 Exchange Restrictions:

1) Exchanger has 45 days from the date of the sale of the first relinquished property to identify potential replacement property or properties; and a total of 180 days from the original sale date to purchase the replacement property or properties.

2) Exchanger must acquire replacement property of equal or greater value, obtain equal or greater debt on the replacement property, reinvest all the net proceeds realized from the sale of the relinquished property, and acquire only like-kind property.

3) Exchanger must own the investment property for at least one year before he can use it for 1031 Exchange.

4) Exchanger must initiate the 1031 process before the closing, once the closing occurs; it’s too late to utilize the 1031 deferred exchange.

5) Exchanger may use the vacation house or primary residence for 1031 exchange as long as the property is reported as a rental or business use on the tax returns for two consecutive years.

Advantage of NNN 1031 Exchange Properties Investments:

1) When selling real estate, if you sell and reinvest, you will pay income taxes on the realized gain. However, with 1031 exchange, you will defer the tax gains.

2) You may have management-intense rental properties and would prefer to transfer your equity to ease-of-ownership single tenant properties (coupon clippers) such as Walgreen Drug Stores, Wal-Mart, Post Offices, 7- Eleven, Office Depot, etc. (Advantage of NNN 1031)

3) You may have been holding properties long after their appreciation has topped out. You can start rebuilding your equity by disposing of those investments and acquiring new ones.

4) You may have some non-income producing real estate investments, such as raw land. You could exchange this property for another asset that would not only give you cash flow, but also get you income tax deductions such as depreciation, which you did not have with your raw land.

5) This means that more money is available for acquiring your next investment. It can be regarded as a free loan from the government!

6) You may have owned a leveraged property long enough to have accumulated considerable equity. You now have an opportunity to exchange into a larger asset, and reposition your equity to your benefit or that of your heirs, without paying taxes. We highly recommend using qualified professionals that have experience in 1031 tax-deferred exchanges to guide you and ensure your compliance with government regulations.

7) With proper estate planning you can keep exchanging properties throughout your lifetime. Neither you nor your heirs will ever pay income taxes on the gains. By doing a tax-deferred exchange,you conserve your equity by not having to pay taxes on your net profits.

Above points are the advantage of NNN 1031 exchange.

Disadvantage of 1031 Exchange Investments:

1) Exchanger will have a slightly lower depreciation schedule when acquire new properties. This is because the IRS will look at the new tax basis as being the same as the previous one, less the deferred gain.

2) Exchanger losses on the income tax return cannot be deducted if you exchange property rather than sell it. If you want to take a loss, simply call it a sale, not an exchange.

For additional information regarding Advantage of NNN 1031, Clean Site, 1031 exchange, NNN Property due diligence period, Foot Traffic Counts, commercial nnn properties, Insurance Policy and Lease Triple Net Properties, please contact NNN Investment Group today.

What is a Leasehold NNN Property?

15th October 2020 by Robert Gamzeh Leave a Comment

An Introduction to NNN Leasehold Properties

With the shortage of lucrative NNN investment properties in densely populated urban areas and the continued cap rate adjustment for property, more and more people are now eying leasehold NNN properties in the US. Unlike the common net lease investment, the leasehold investor never takes title to the underlying land. The investor only purchases the right to use the property until the lease term expires. At the end of the lease term, the property is given back to the legal owner of the land.

When you buy a leasehold property, you are buying only improvements, (i.e. the structure) and not the land. Leasehold is a kind of property in which a person holds the right to the property for a defined lease term- ranging from a period of 99 to even 999 years. In the event of expiry of the lease period, the ownership of property reverts back to the freeholder or owner of the property. This is in contrast to freehold, where the ownership is completely held by the owner. In this type of property, leaseholder is responsible for the maintenance of everything within the property’s four walls, in addition to rent. The maintenance includes floorboards and plasterwork, but excludes the exterior or structural walls.
Top Reasons for Investing in NNN Leasehold Properties:

You gain control over the land and the ability to rent it out to someone else
You can depreciate your entire purchase price, which reduces your tax bills
As a tenant, you may pay rent in single payment or pay it annually in installments
As a tenant, you become the owner of the internal building in which you live in
The lease term could be extended through mutual agreement between tenant and the landlord
Landlord has less or no management responsibilities, as the tenant manages the building

Major Advantages of Leasehold NNN Properties

For cash flow conscious investors, buying leasehold asset can be a good way to invest in real estate. The added advantage of buying such a lease is that you get control of the land and the ability to rent it out to someone else, which helps you earn a good income. (Advantages of Leasehold) Another benefit of investing in this type of estate, you can depreciate your entire purchase price and thus reduce tax on your cash flow. The third most striking feature of the leasehold properties is the payment flexibility, which means the tenant can pay rent in single payment or pay it annually in installments. Finally, though leasehold interests are not real estate, the IRS however lets you to do 1031 tax-deferred exchanges in and out of them, on the condition that the ground lease has around 30 years of remaining term. This will enable you get high cash flow, while having the benefits of buying and selling without having to pay capital gains tax – Advantages of Leasehold

When is the Right Time to Invest in Leasehold NNN Properties

With the shortage of desirable NNN investment properties in the urban areas of the United States, the demand for leasehold properties is going up with the passage of time. If you are looking to invest in these types of real estate assets, now may be the best time to consider investing in a NNN leasehold deals. Unlike the traditional net lease investment, the leasehold investor never takes title to the land, but they do get the right to use the property for a definite period of lease. At the expiry of lease term, the ownership of the real estate reverts back to the owner of the land. That way, investing in these sorts of real estate products is a win-win situation for both the tenant as well as the property owner.

Who is the Buyer and Seller of Leasehold Properties?

The buyers of leasehold properties are mostly 1031 exchange buyers and large funds, REITS or insurance firms that look for higher return on the investment and 100% depreciation for tax benefits. The sellers of these properties may usually include the large funds, REITS, and people who bought them in previous 1031 exchanges. They may also comprise of the owners who wish to keep their land, but don’t mind to sell the improvements at lower prices. They buyers may also be the individuals, who don’t want to manage their properties any more and sell the leasehold, let someone else (tenant or lessee) manage it,and thereby make extra money coming through the rent from the tenant (company).

Things to Consider When Investing in Leasehold Properties

When buying a leasehold property (buyers of leasehold), there are many factors to be kept in mind. It is advisable to spare some time to check out the location of various estates and compare them in terms of price, benefits and features. Ask if it is right property for you. Always negotiate the lease terms carefully. It is much lucrative, if you enter into a long term lease, because it will provide security and a fairly long time to do business. As an investor, you also need to check the background of tenant as well as seller of the property, if you want to move in this type of real estate safely. Finally, make sure to give your building to a tenant with high credit rating, because this will enable to receive higher rent on the specified time.

To be part of successful real estate however, it is essential to have an experienced real estate advisor in complex lease transactions. A good real estate agent will tell you about the varied pros and cons of investing in such properties and also help you finalize real estate deals successfully. Get in touch with our experts at Triple Net Investment Group for your queries and concerns pertaining to real estate.

For additional information regarding Advantages of Leasehold, 1031 exchange, Seller of Leasehold, buyers of leasehold and Lease Triple Net Properties, please contact NNN Investment Group today.

Subordinated & Unsubordinated Ground Lease Properties

11th October 2020 by Robert Gamzeh Leave a Comment

What is Ground Lease

A ground lease is a long-term lease in which a tenant is permitted to develop a piece of property during the lease period, after which the land and all improvements are returned to the property owner. All the improvements made on the land will be owned by the property owner unless an exception is made in the agreement. A ground lease stipulates that all relevant taxes incurred during the lease time will be paid by the tenant. Ground leases may typically range from 10 years to 99 years. They are often commercial real estate products permitting the tenants to build business without the expenses of buying a land. They allow tenants to make improvements like building a restaurant, supermarket, store or any other commercial structure.

Subordinated & Unsubordinated Ground Leases

When it comes to ground leases, you may enter into an unsubordinated or a subordinated lease. In a subordinated lease, the owner of the property becomes a kind of partner in the land development by helping you obtain the necessary financing. He/she allows the mortgage on the property to be in a primary position to the lender and the land to be in a subordinated position. But this may be a bit risky for the landlord, because it means if the bank has to foreclose, they can take away the land in addition to the building. On the other hand, if you enter into an in subordinate lease, you have to offer the financed improvements, such as his business structure, as collateral for the loan. In this type of lease, a lender may claim the ownership of the tenant’s project only if he defaults on an in subordinated ground lease, but he cannot take the ground upon which the business complex exists. So, the owner cannot lose his/her property, even if the bank forecloses.

Major Benefits of Ground Leases

· Free capital that would be paid for land acquisition- there is no need to finance the land. The developer /lessee have enough capital available for construction works on the land.

· Offer a tax advantage-lease fees can be deducted as a business operating expense on taxes, thus reducing the tax burden on the tenant or lessee.

· Lessee is protected from downturns in the real estate market- a lessee is not dependent on the increasing value of the land, because his/her retail or commercial activities provide added value.

· Improvements on the leased property help tenant to run business and at the same time they increase the value of the land for owner.

· Ground lease allows the owner to retain ownership, while giving stable income without the expense of developing land.

· The landlord can benefit from the rent from the lease as well as capitalize on improvements made to the property

When & Why Businesses Buy Ground Lease Properties

When a business requires expanding and adding a new building, the logical option may seem to buy land on which a structure can be developed. However, owning a land comes with so many responsibilities. You will need capital to buy the land or you must take debt. Then there are property taxes and expenses for repair and maintenance of the building on land. Therefore, a better option is to choose a long-term ground lease. Ground leases properties allow investors to develop a piece of property without buying land. They enable businesses to avoid paying property taxes on land, thus saving thousands of dollars for the lessee/tenant (businesses). One common reason for investing in commercial ground leases is that they protect business from downturns in the real estate market. A ground lease is a long-term lease and allows investor to run business for a pretty long time of 10 to 99 years without any hassles. This type of real estate asset offers many benefits to the landlord. It provides long-term stream of income while retaining the ownership of the land. It also protects the landowner from the cost of developing the land. This is why most people now are considering ground lease as alternative strategy to 1031 exchanges and other investment options in the commercial real estate.

Who Can Invest in Ground Leases

A ground lease property is an ideal option for a company looking to develop a parcel of land and operate its business for a fairly long time without having to buy the land outright. Unlike traditional commercial leases, a ground lease typically runs at least 10 years and more. This type of investment is a great ideafor national retail and restaurant chains that want to run business in prime locations without investing in real estate. It allows investors avoid heavy tax burden and frees the capital required to improve the land.

Who Sells Ground Lease Properties

The seller of such properties are mostly property developers and owners. (Sells Ground Lease) They lease the property to a national tenants ( institutional investors, corporations or franchise firms) who build the site for their own use for raising capital to expand business, paying debt or investing money in other projects.(Sells Ground Lease) The main reason, why companies enter into these transactions is to avoid paying tax on the land, using the developed site for running long term business and earn stable income. These real properties are loved by buyers, because they know, if the tenant leaves, it is windfall for the owner. All improvements made on the land will go back to owner.

Things to Consider Before Investing in Ground Lease Deals?

Over the years, ground lease transactions have become very popular for the sole reason that they help the owner to retain ownership, earn stable income and get back his/her property with all improvements made on the land. However, there might be some pitfalls for new investors.

It is therefore advisable to consult an experienced commercial real estate advisor. Make sure to check out tenant’s credit history. Do a background check on tenants (corporations, businesses etc) to be sure about their credit rating and income. Be sure to get the property in a prime location for its fair market value. Always negotiate price through a reliable broker to get an asset at reasonable price. For advice on ground lease opportunities, just talk to our expert consultants at Triple Net Investment Group Inc, one of the most trusted commercial investment firms in Washington DC area specializing in acquisition and disposition of the commercial investment firms real estate properties. – commercial investment firms

For additional information regarding Unsubordinated Ground Lease, 1031 exchange, subordinated Ground Lease, Sells Ground Lease, Investing in Ground Lease, commercial investment firms and Lease Triple Net Properties, please contact NNN Investment Group today.