Couple Trades a Residential Rental for Fast-Food & Gas Station Triple Net Lease Properties

Jan 13, 2022

During the peak of one of the tightest triple net (NNN) lease property markets in history, first-time NNN investors contacted Jason Simon, Vice President of Westwood Net Lease Advisors, to learn more about the NNN buying process. They also wanted to know if they could perform a 1031 exchange on a residential rental, which they had just sold.

Simon shared with the couple that, yes, they could perform a 1031 exchange to trade up from a residential income property to a triple net property. However, they needed to act fast to find the property or properties they planned to buy, and inform the IRS in writing of those properties within 45 days of the sold property’s closing date. The biggest challenge would be finding one or more available triple nets within their budget before someone else contracted to buy them.

Find out how this California couple purchased a Hardee’s and a Mountain Express gas station/convenience store by trading their residential rental, and now collect a total of $146,985 annual net operating income (NOI) for up to 20 years.

Green gas station and store lit up at night

The Challenge – Locating Triple Net Lease Properties For Sale within Budget in Extremely Competitive Market

In 2021, essential, pandemic-proof businesses like Dollar General, 7-Eleven, and KFC were thriving, and investors were buying these properties at a record pace. Because of this, Simon’s clients relied heavily on him to locate the best properties for their goals, get them under contract before anyone else, and close within the 180-day 1031 exchange requirement, all while keeping to their budget.

Additionally, a timing challenge presented itself near the end of the transaction. Six other parties were trying to close their deals on the same day at the same title company. Simon had to work closely with the title agents and other brokers to ensure his clients would close on both properties on September 28, 2021. This ensured they met their 1031 requirements and wouldn’t lose either property to other buyers.

The Process – Triple Net & 1031 Transaction Details & Complexity Handled by Simon

From the moment this couple contacted Simon for assistance, he got to know them and their objectives, guided them through the triple net buying and 1031 exchange processes, and educated, advocated, and represented their best interests throughout every step.

Simon also got the ball rolling quickly to notify his vast nationwide network of brokers, sellers, and developers. He put the word out for newly listed or pre-listed properties that represented strong investments and less chance of closing-table issues. Within hours of communicating what they were looking for, the Hardee’s and Mountain Express gas station purchases were being negotiated, at which point Simon helped them craft a letter of intent (LOI) and contract agreements for each property, and managed the urgency of the two-property transaction with ease.

Moreover, securing a commercial mortgage for each and closing on two very different properties on the same day within the 1031 exchange timeline was complex with many moving parts.

Simon had to coordinate with the couple’s lender, communicate with different sellers’ brokers and corporations, manage due diligence on two properties and leases, and use his network relationships to ensure the title company scheduled the closings without delay and kept to that schedule.

Did you know?

Gas stations and c-stores are a great investment for any lifestyle, financial requirement, and portfolio. They typically sell between $2–4 million but can go higher for some tenants. They average a 12-month cap rate of 4.50–6.00%, and most often, operate with 15–20 year leases on new construction.

Fast-food and QSR properties are also great triple net opportunities. They typically sell between $1–3 million and average a 12-month cap rate of 4.00–6.00%. Most often, they operate with 15-year leases on new construction and drive-thru-only properties are creating investor opportunities. These companies have created more efficient, adaptive business models to handle future crises.

The Result – Triple Net Buyers Satisfy Their 1031 Exchange with a Hardee’s & Mountain Express Gas Station, Earn $146,985 Annual NOI

By selling their high-maintenance, costly California residential rental property and trading into essential-retail triple nets, these investors deferred tens of thousands of dollars in capital gains taxes – money that now works for them and their future. They can count on responsibility-free, guaranteed monthly income from both corporations for up to 20 years or more if the lease extension options are exercised.

Sixty days after making an offer on the Hardee’s fast-food restaurant and Mountain Express gas station and convenience store, this first-time, triple-net investment team became the proud owners of two high-quality, reliable, absolute NNN properties that provide a worry-free $146,985 NOI, annually.

Stacks of money in a briefcase

To Wrap it Up – New Triple Net Investors Sell High-Maintenance Property for No-Maintenance, Income-producing NNN

Westwood Net Lease Advisors Jason SimonIt was beneficial for Simon’s new triple net investors to contact him right away when they sold their California residential rental. They needed an experienced advisor to find the right NNN properties and get them under contract in the extremely tight market, as well as help them meet the 1031 exchange regulations. In the end, they sold a high-maintenance, costly property for two absolute triple net investments that provide much greater responsibility-free income.

If you are interested in learning more about triple net lease investments or would like to use the 1031 exchange to trade an underperforming or high-maintenance property for one that offers nothing but benefits, contact Jason Simon, for a free, no-obligation conversation, 314.563.2206.


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