Why a NNN Buyer’s Advisor is More Important than Ever
With the prevalence of do-it-yourself online services for nearly everything, it may seem easy to find your next triple net (NNN) lease investment using online platforms, services, and software. Those ads for the “best user-friendly commercial real estate software” … we’ve seen them too. But how comfortable are you investing hundreds of thousands or even millions of dollars using a DIY approach? How well do you know the NNN market, and can you lock in the desired purchase price and cap rate on your own?
NNN lease investments are known for being straightforward. However, from before the property search until you get to the closing table and sometimes thereafter, there are multiple actions that must be taken to protect yourself from making an expensive mistake — most of which cannot be accomplished with CRE software.
15 Things to Ask Yourself Before you Use Online Platforms & DIY CRE Software to Buy a NNN Lease Property
Let’s say you’ve located a NNN gas station that you’re interested in purchasing and you’re ready to make an offer. Who will you contact first to get the ball rolling? (Don’t contact the seller’s agent; he or she is looking out for the seller’s best interests, not yours). If you have an attorney who helps you buy real estate, are you paying more than you need to for things like due diligence, tenant credit checks, lease reviews, and time spent on the minutiae?
To find out if using online platforms and CRE management software for triple net investing is for you, answer the following 15 questions.
- How do you know which property is the right choice for your financial objectives and lifestyle goals?
- Have you performed a risk assessment to understand your risk tolerance and how much ROI you need?
- Do you know how to calculate cash flow, ROI, and your potential internal rate of return (IRR)?
- Do you need a tax benefit from the property?
- Are you using your capital in the most productive way?
- Do you know whether the tenant operates with a triple net ground lease, absolute triple net, basic triple net, or a double net plus lease, and what that means for you?
- How will you negotiate the final purchase price and cap rate and increase your chance of having your offer accepted?
- Is the real estate software intuitive enough to present a comprehensive letter of intent (LOI)?
- Have you researched the tenant’s credit and/or the franchisee’s credit?
- Do you know how to deep-dive into the tenant’s balance sheets and what red flags to look for?
- Can you decipher the terms of the lease, find hidden clauses, and negotiate the finer points?
- Who will perform in-depth due diligence in the short timeframe allotted?
- What happens if there’s an easement or environmental issue during the inspection?
- If you’re using a 1031 exchange, are you following the IRS’s strict rules and meeting the timeline?
- What are the bottom-line costs of the transaction when managing it yourself or using an attorney?
By answering those 15 questions, you can see the risks versus rewards of DIY NNN investing. The financial risks are too high to go it alone. There’s no reason to spend your valuable time and incur extra expenses to buy your first or next triple net lease investment when you can benefit from free buyer representation.
Why Use a NNN Buyer’s Advisor Vs. CRE Software?
There are multiple reasons why engaging a buyer’s advisor for NNN investing is safer than using at-home CRE software or online tools. One of those reasons, aside from providing personal care and being a sounding board, is that a buyer’s advisor will ensure a solid, reliable, no-surprises NNN investment that’s aligned with your goals.
You Are Empowered to Make the Best NNN Investment
A NNN buyer’s advisor works hard to protect your interests throughout your triple net buying experience. Providing objective advice, education, knowledge, and advocacy empowers you to make the best NNN investment possible.
For example, if you find a property that seems like a perfect fit, your advisor may uncover reasons why it is not the optimal option for you and show you other properties that better represent your goals. Knowing what to choose and what NOT to choose are equally important to your investment strategy.
Your advisor will also comb through the lease to ensure it is what it seems to be, with no hidden clauses or exceptions that might change your cash-on-cash return, verify the creditworthiness of the tenant, and:
- Decode cap rates
- Help you avoid mistakes
- Negotiate on your behalf
- Provide financing and other professional resources
- Structure the deal
- Perform due diligence
- Manage resolution of any issues that arise
- Work with all parties involved to further the transaction
- Help you fully utilize the 1031 exchange and get the deal closed on time
Navigate Exiting the Stock Market or Selling a Business with NNN Investing
In this uncertain economy, Westwood Net Lease Advisors are helping triple net lease investors navigate often-complex financial transitions with success, including what to do with cash from exiting the stock market, transitioning from business ownership, and getting familiar with tax-code adjustments.
Your advisor will help you understand how a net lease property can manage inflation, enable depreciation, and provide long-term, worry-free monthly income with periodic increases so you can optimize your investment.
NNN Buying Advantage with Higher Cap Rates in Competitive Market
In the extremely tight, highly-competitive NNN market, where many sellers are only selling through real estate advisors, we are locating properties and securing deals for investors before other buyers know about them, giving our clients a distinct advantage.
Additionally, if you’re researching NNN properties online, you may not see a material change in advertised cap rates. Brokers and their sellers are saying, “Here’s my price and cap rate, take it or leave it,” but as industry professionals, we’re seeing some flexibility. For example, Westwood’s advisors are getting some sellers to come down on the asking price, increase cap rates, and at times, give a 25-point basis discount to meet our buyers where they want to be. Narrowing the cap rate spread makes purchasing their properties more attractive. This is where an experienced buyer’s advisor can help you elevate your investment.
Understand and Utilize Triple Net Lease and CRE Tax Codes
When it comes to CRE tax codes, the 1031 exchange is one of the most beneficial tools for NNN investors when performed within the strict IRS rules. Utilizing the 1031 without assistance from a specialized buyer’s advisor, who keeps the transaction moving within the 1031 timeline, could amount to a bill for hundreds of thousands or even millions of dollars in capital gains taxes, money that could be working for you and your future.
Your advisor will also make clear the different types of depreciation, and with your CPA, help you determine if you can use one of them to recover the cost of an income property and increase your net operating income (NOI).
Diversify Your Portfolio
Want a more diversified portfolio? This is another area where software can’t replace a buyer’s advisor. A Westwood Net Lease Buyer’s Advisor can provide examples of you how you can diversify your overall investment portfolio or your real estate portfolio with NNN investments. Many people feel that triple nets are all same — low cap rates, low price, low maintenance, and low income. Nothing could be further from the truth! Unlike other types of investments, a range of properly chosen triple net properties based on location, tenant type, lease duration, lease type, and asset class, can provide risk-and-reward balance, ease of ownership, and a very healthy monthly income that won’t disappear tomorrow or lose value overnight.
That NNN dollar store or gas station for sale you just saw online is probably already under contract. In the current NNN market, with supply low and demand high, good triple net lease properties are selling fast. And many are never listed on the open market because some sellers prefer to sell off-market, through real estate brokers and advisors.
If you’re in a hurry to invest, you’ll have a much better chance of finding a NNN lease property, presenting a letter of intent (LOI) and having it accepted when you work with a buyer’s advisor versus using DIY CRE software. You’re also less likely to make a costly mistake due to urgency, especially where the 1031 exchange is concerned.
Purchasing the right property requires an advisor who knows the market, is well-known in the marketplace, has the inside scoop on properties coming up for sale, and can act fast.
To Wrap it Up — Using Online Tools & CRE Software for DIY NNN Investing Presents Risks
As much as we like to use online tools and user-friendly software for different things ourselves, we also know when large sums of money are involved, it’s wise to engage a professional. In this case, DIY triple net lease investing using CRE management software without the safety net of a buyer’s advisor is just too risky to your financial well-being and lifestyle.
Besides, why put yourself through the lengthy, complicated, and often stressful day-to-day management of the deal when a buyer’s advisor can do it for you? From before the property search through closing, at no cost to you, Westwood Net Lease Advisors will get you to the closing table with ease, while you carry on with life. We are invested in your success! Contact us today for a no-obligation conversation. 314-997-5227