Who Buys NNN Properties?
Investors who wish to have outright ownership of their investments. The alternative would be to own a security in the form of a mutual fund or REIT. A major advantage of 100% direct ownership is control and the ability to defer future capital gains by doing a 1031 exchange when the property is sold. The lack of immediate liquidity that a mutual fund or REIT can offer can be a drawback for some investors and should be considered carefully before investing. How are Net Leased Properties Valued? Net lease properties typically are valued using their Capitalization Rate also referred to as Cap Rate. The cap rate reflects the value of a stream of economic benefits discounted for time and risk. Generally this is computed by as a pretax cap rate using the Net Operating Income (NOI). NOI is income less all expenses before debt service. The Cap Rate is the NOI divided by the purchase price. Conversely the NOI divided by the Cap Rate will equal the purchase or selling price. Example: NOI = $100,0