Q: How are NNN leases typically structured?
A: NNN lease agreements are generally structured in one of three ways:
1) Sale/Leaseback: Sale and leaseback financing is structured through the sale of a property by a business owner/occupant. The business owner/occupant sells the property to an Investor and leases it back on a long-term triple net lease. This frees up cash for the business owner to invest in his business rather than in real estate.
2) Build-to-Suit: A developer enters into a long-term agreement with a corporate tenant, builds the facility to the tenant's specifications, and then sells the property with the new NNN lease upon completion of the development or even before.
3) Existing Property Sale: The sale of an existing NNN leased property by another investor.
Q: What is the investor's role?
A: The investor's role is a passive one — the investor need only collect his rent, which is typically prearranged to be wired each month directly into the investor's designated banking account. This is just one of the many features that make long-term NNN leased property ownership so desirable for self-directed IRA accounts and 1031 exchanges.
Q: How safe are NNN properties?
A: No investment, except a federal bond, has a zero default rate. Therefore, no investment is risk-free. However, with a diligent evaluation of the NNN deal, the investor enjoys the security of the long-term NNN lease, the high cash on cash return on their passive investment, and they own the real estate, but they have zero on-site management responsibilities and no operating costs.