Frequently Asked Questions

1) Why would a large company such as Home Depot or Starbucks lease their property?

These firms are not in the real estate business.  Using long-term leases takes the real estate asset and subsequent debt off of their books and places it on the investor’s.  The net lease arrangement allows the company to control the use of the property for a long period of time without a large cash outlay, allowing the company to redirect the assets to their core businesses, in this case, hardware and coffee.

2) Who is buying net leased property?

REITS and Institutional investors are large buyers of net leased properties. Those seeking to simplify their real estate holdings, reduce time spent in managing property, increase the quality of their tenant and engage in a 1031 exchange are the typical individual investors in net leased property.

3) Who arranges the financing? 

Unlike tenant in common investments where the financing is packaged in to the investment, net lease, fee simple property requires buyer financing. There are many national lenders that provide financing.  While credit of the borrower is important in the credit decision, the lender heavily weighs the credit rating of the tenant.  Credit ratings are determined by Standard & Poors (S&P) or Moody’s, to name two.  Financing rates for real estate with investment grade tenants (BB- for S&P and Baa3 for Moody’s, or higher) tend to improve the higher the credit rating. 

4) How liquid is the investment?

The investor controls when to buy or sell fee-simple, net leased properties.  Due to the rise in real estate investors engaged in Section 1031 exchanges, net leased properties have become an increasingly well-known mechanism to cover an investor's need for replacement property. The investor pool is larger for lesser valued properties (less than $1.5 million).  As with any real estate investment, care should be given to performing due diligence on the purchase.  Highest and best use, creditworthiness of tenant, terms of the lease, condition of building, usefulness and location of property and competitive cap rates are a few of the items that will determine the attractiveness of the real estate to the market. 

Contact Us

For further information, please contact:
Eric W Odum,
813-391-7442

Real Estate transactions handled through:

Bryan McGuire,
Licensed Real Estate Broker,
247 McMullen Booth Rd.
Clearwater, Fl  33759
727-669-4096