Like many of my long time clients, you might have an enormous equity in your vacant or marginally rented home or units. I have calculated that an average of 1.9% net return per year is generated by rented homes and 3.2% on rented units. This is to my standards an extremely low return on the investment; especially taking into consideration the usually heavy workload and aggravation that comes associated with rental homes or apartment units; repairs, bad tenants, evictions.
Considering that appreciation might be very low for the next three to five years, many of my clients, following my advice, have switched to another type of Real Estate investment that eases the burden sometimes associated with rental homes.
I am referring to NET NET NET Real Estate Investments. The poor 1.9% or 3.2% return can be increased up to 10% return per year, sometimes even more and many times totally management free.
With NET NET NET Real Estate Investments, the tenant pays for property taxes, liability insurance and maintenance on the investment property. Usually, these type of investments are leased long term, 10, 15, 20 years or more, with options to renew, to BB+ tenants, all over the USA. Many times there are rent increases that bring up your cash on cash return. Large companies like Walgreen's, CVS, Rite Aid, Advance Auto Parts or even a multitude of franchises like Wendy's, Taco Bell's, Burger King's, and others, are not interested in owning the land and the buildings, since their business is opening more and more outlets. They prefer to pay rent.
Many of my investors think that they have to buy these types of investments with a group of other investors. You can if you want; with family, friends, etc. but only if you want to do that. Otherwise, you can buy the investment by yourself, with 25%, 30%., 35% or more downpayments, since there is long term financing available for purchase these types of properties, that sometimes come with prices as low as $ 500,000.
Now, if you have been renting your home for sometime, your property might be considered an investment property and subject to a 1031 tax deferred exchange; your units are always considered investment properties. The advantages of a 1031 exchange are many. The most important one is probably deferring your capital gains taxes for as long as you keep exchanging. Your rental home or apartments could be the perfect candidates for an exchange into a NNN R.E. Investment. Many times, the yearly income tax on the cash flow can be offset with the depreciation, so you do not have to pay income tax for a while. Of course, each case is different. You would have to consult with your CPA, your attorney or both.
Even if your home is not an investment property, it would be worth while to explore the possibilities of having to pay taxes in exchange for freeing your equity and your time, and make some money in the process. With triple net investments you only have to wait for your monthly check and pay the mortgage on your loan. That easy.
If you are interested in exploring the possibilities, please give me a call at your convenience. The best telephone to receive immediate attention would be 619-39... or please, email me.
Thank you
Isaac Bensussen.
"Bensussen Means Business since 1976"
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