What is considered a good cap rate?

As previously discussed, your cap rate (capitalization rate) is calculated by diving your Net Operating (Income after  income by the purchase price. To put it more simply, it would be the return on your investment if you were to buy a property outright without any financing. The higher the cap rate the better. Typically however, the higher the cap rate the higher the risk. Therefore having a good cap rate becomes dependent on the level of risk the investor is willing to take on. Therefore obtaining a good cap rate is all relative. Finding the right balance between a good cap rate and maintaining low risk is the main goal

What is the price range of STNL and NNN investment, and how much do I need to invest?

In the world of NNN investing, price points vary greatly depending on the tenant, location, and length of lease. Generally speaking, these investments can range anywhere from $1MM to $10MM, however outliers are common. Within financing in place, an investor can expect to need 30%-50% in equity for these types of investments.

How important are demographics?

Demographics are a great starting point in understanding the immediate market and population projections for NNN investments.  Generally, demographics are presented as population figures within a 1,3, and 5 mile radius of the subject property. When looking at demographics, the investor is presented with information on population count, income levels, household numbers, and forecasts for all of the aforementioned. Stronger demographics reflect a more desirable property is, which helps gauge the level of risk in the event of having to re-tenant the building at some point in the future.

Should I only Buyer Triple NET Deals or are Double Net and Net Deals a good option?

This question is dependent on how many managerial responsibilities the investor is willing to take on.  Some double net deals for example call for the owner to be responsible for roof and structure. In this example if the roof needs repair or worse yet needs to be replaced, the owner will be responsible. These deals trade at higher cap rates, so it once again boils down to balancing risk and rewards.

Should I only consider  credit-rated tenants?

Credit rated tenants come at a cost, and only equate to additional stability during the length of the lease. Therefore the credit rating is an important consideration, however should only serve as a single factor in the investment making decision. If a building is located in an incredible location for example, and the tenant is in a booming industry and has experienced a great deal of success there, not being rated would not be as important.

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