Triple Net (NNN) 1031 Properties Exchange Investment Risks

Commercial real estate (CRE) triple net (NNN) properties are a go-to opportunity for 1031 exchange investors seeking deferment of capital gains taxes but come with some significant investment risks that used to be baked into the deal that no longer have to be part of anything.

Triple net (NNN) properties are commercial real estate properties that are leased to a commercial business (or multiple businesses, as the case may be), and that business is responsible for paying the real property taxes, paying to keep the property maintained, and paying the insurance costs of the property – each represents a separate “net” payment obligation of the tenant.  The practical impact of this is that just about all of the tenant lease payment represents net operating income to a triple net property ownership entity.  Good in as far as it goes but there are some risks that come with this panacea.

Currently, there is a focus on what is known as “tenant quality” – issues arising out of the current financial capacity of the tenant to meet their obligations but this is not as nearly as important as the tenant’s future financial capacity, and that is ruled by so-called market forces.  Sears, ToysRUs, Caldor, Blockbuster… the list is nearly endless of companies that looked great when the lease was signed and are now gone, leaving a trail of financial losses and woe behind them.

CRE Investment Loss Severity Risk Prevention Program
Real-Time Status Asset Loss Program Operations Real-Time Phases

INVIZEN provides the only end-to-end solution that is specifically designed to help deal with this issue by looking more at what the future tenant should be for that specific market and then monitoring both the tenant and the market forces to provide up to 24 months of advance notice of problems before they are losses. Equally important is the prevention of investment fraud at all levels of the transaction the INVIZEN program approach requires to be observed due to our advanced VERIFY NOW fraud deterrence management and mitigation program approach that puts all parties on the record regarding their understanding of their obligations regarding contractual relationships and expectations.  By combining forecasting, underwriting, ongoing monitoring, risk mitigation and reporting functions all in one platform, effective risk mitigation is the outcome on a proactive basis (and not a reactive basis).

Find out more about this amazing system by continuing to browse our website or by calling us at 832.663.9634 to learn what this could mean for your prospects.