Retail Space

PROS & CONS OF NNN INVESTMENTS

• PROS

  For Landlords:

  • A profitable NNN asset will provide investors with long-term, consistent income and cash flow at lower levels of risk.
  • NNN assets require less day-to-day management by the landlord. This is because the expenses associated with utilities, repairs, taxes, insurance and management costs are the responsibility of the tenant.
  • When NNN assets are sold, the investors may roll their capital gains into tax- deferred investments such a 1031 Tax-Deferred Exchange.
  • With multiple-tenant NNN properties, landlords often have the ability to attract different types of tenants from various industries. This might help a landlord to diversify their risk.

  For Tenants:

  • Tenants generally have more influence over the appearance, function and maintenance of a property.
  • Tenants also have more direct control over their property expenses. In many cases, tenants may choose their own utility providers, insurance carriers and maintenance companies.
  • In many situations, tenants may protest their own taxes in order to keep them as low as possible.
• CONS

  For Landlords:

  • NNN lease rates can be locked in for many years regardless of any changes in market value.
  • Increases in property market value will not be realized immediately.
  • A Landlord may face considerable vacancy costs if a tenant defaults or otherwise fails to pay their rent during the remainder of a lease term.

  For Tenants:

  • Tenants are usually responsible for several duties regarding the upkeep of the property including landscaping, property maintenance and repairs.
  • In addition to upkeep and maintenance, tenants often have additional responsibilities such as finding insurance policies and protesting property taxes.
  • The above responsibilities can distract the tenant from operating their core business while generating unforeseen expenses that the tenant would otherwise not be obligated to pay.