Below is a summarization of an article on net-lease investments in the most recent issue of Globe St.’s Real Estate Forum titled “Long Term Rules in a Short-Fused Market”
- For some investors, net lease investment’s income potential scores over short-term capital gains other asset classes offer.
- Investors looking for quality net-leased properties won’t find them at distress-sale prices.
- However, the customary attributes of this niche sector – stability, predictable cash flow and low operating costs – combined with higher cap rates and more readily available financing make the long-term potential attractive.
- Net-lease investments provide a “conservative, low-risk way to invest” providing “good long-term income characteristics” versus short-term capital gains.
- Currently the market is showing net-leased investments separated up into three segments: properties that are well-located with highly-rated, investment grade tenants; properties with the aforementioned attributes as well as assumable debt; and properties with non-credit tenants.
- Choosing the right property is a balancing act between the tenant’s credit, the quality of the asset, and the structure and duration of the lease.
- When considering the real estate, many investors look for something that’s generic and multi-functional across several asset classes.
- “The first markets to get financing will be those that have the highest quality real estate and predictable cash flows…and that applies to the higher-rated net lease properties.”
Full article at GlobeSt.com’s Real Estate Forum
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