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Why take the risk of the stock market, commodities, currencies, and even risky commercial real estate deals?

It is one thing to be under 45 or 50 and still have a good 15 or 20 years of solid earning potential, but to my family members who are retired or semi-retired, the 30 to 50% hit their retirement portfolios have taken has devastated them.

The investment I am going to talk about is a commercial real estate investment known as single tenant retail triple net (NNN). It is an investment that is geared to people with upper incomes, $150,000.00 annually and up. Properties range in price from $500,000.00 and can go up to $10,000,000.00 depending on what state and city they are located in. You would be surprised as to how many people do not know about this type of property.

The single tenant triple net property, (from here on out referred to as NNN) are properties where one person or entity owns the real estate (land and building) and leases to a tenant for a period of 10 to as long as 25 years. Usually there are also options on the lease that can extend the time in excess of 50 years. The tenant agrees to occupy the property, operate the business on the premises, and pay rent. Are you sitting down for this next part? I hope so. Best of all, the tenant pays for all property expenses including taxes, maintenance, and insurance.

What do I have to do as the landlord? Again, I need you to sit down for this. As the landlord, your sole responsibility is to go to your mail box every month and get your rent check! This type of commercial real estate is lovingly referred to as “mail box money”.

There are basically 3 categories of NNN properties. The first is fast food restaurants. There is a reason why I subscribe to Restaurant News. This is a huge category of NNN properties. And in my opinion the most dependable. Examples are Wendy’s , Arby’s, Burger King, etc… you know the list. A lot of people do not realize that very rarely do these companies own the real estate that they run their business on. They are mostly owned by high net worth individuals like yourself.

The second category is small, medium, and big box retailer. Examples would include Family Dollar Stores, Tractor Supply, and Best Buy. Again, names that we all know and are very familiar with. These properties are owned by private individuals and the entities they set up to own these properties.

The third, and last major category is Pharmacies. These can be the most pricey because of their locations, size, and credit worthiness. Some examples would be Walgreens, CVS, and Rite Aid drugstores.

How do we manage risk?

With any investment there is a risk obviously. No matter how big the company is. The NNN property is no different. The stronger the credit, tenant the less the yield is going to be and the more expensive the property is. Let me give you an example of risk and credit rating of a tenant. If I am looking to buy a Walgreen’s I am going to pay a lot more and my yield is going to be a lot less than if I were going to purchase a Pizza Hut with a franchisee who had 4 stores. My risk is going to be greater with the 4 store franchisee who is signing my 20 year lease then with a company like Walgreen’s who is an S&P credit rated tenant.

What is great about this product is you control what risk you want to take. Unlike investments like stocks, bonds, metals, and currencies you have control of this investment. How? You will decide what yield and risk you want to take based on the category and the credit tenant.

The return on these types of investments range from 6% to 9.5% again, depending on the category, and area you buy your property in.

I like to sleep like a baby at night and therefore choose to take my credit tenant and my 7% for 20 years. You might have more of a risk tolerance and choose to go with that 4 store franchisee. In which case you could probably get 9% annually over 20 years. Not only do you get the benefit of income but also the growth and appreciation of your property.

Anyone looking for a conservative real estate investment, who is a high net worth individual, should look into this type of real estate. Its like that old commercial, I liked the product so much, I bought it. I have owned NNN properties for years and am very happy with them.


Carmine Tutera is president and CEO of Street Wise Investments, Inc., a commercial real estate brokerage company that specializes in finding conservative real estate investments for high net worth investors. www.streetwiseinvestmentsinc.com