4-23-21

2A — April 23 - May 20, 2021 — M id A tlantic Real Estate Journal

www.marej.com

M id A tlantic Real Estate Journal

M id A tlantic R eal E state J ournal Publisher, Conference Producer . .............Linda Christman AVP, Conference Producer ...........................Lea Christman Publisher ........................................................Joe Christman Editor/Graphic Artist ......................................Karen Vachon Contributing Columnist ....Chay Lapin, Kay Properties and Investments Mid Atlantic R eal E state J ournal ~ Published Semi-Monthly Periodicals postage paid at Hingham, Massachusetts and additional mailing offices Postmaster send address change to: Mid Atlantic Real Estate Journal 350 Lincoln St, Suite 1105, Hingham, MA 02043 USPS #22-358 | Vol. 33, Issue 4 Subscription rates: 1 year $99.00, 2 years $148.50, 3 years $247.50 & $4.00 single issue - plus postage REPORT AN ERROR IMMEDIATELY MARE Journal will not be responsible for more than one incorrect insertion Phone: 781-740-2900 | Fax: 781-740-2929 www.marej.com

By Chay Lapin

Potential Pitfalls Of NNN Properties And A Savvy Alternative ● NNN properties seem like passive investments but actu - ally require regular manage - ment. ● Overconcentration is a key risk when it comes to investing in NNN properties. ● DSTs (Delaware Statutory Trusts) provide an alternative way to invest in NNN proper - ties. ● Diversification and true passivity are unique advan - tages of DST investments. Frequently investors are seeking out reduced manage - ment and or passive real estate investments. Real estate own - ers are simply tired of the three T’s (Tenants, Trash, Toilets) and are looking for alternative options to consider. One option that a lot of inves - tors are being sold by their real estate brokers are Net Leased properties, which are common - ly known as “triple net leases” (or “NNN”). Some Net Lease properties can be nearly 100% passive. Investors will want to carefully understand how the

unique net lease is set up, as some leases may actually have active management responsi - bilities for building upkeep. A client will also want to keep a monthly check in to make sure that the tenant is abiding by their net lease structure and that they are actually paying the various bills (e.g. Com - mon area expenses, Property Taxes and Insurance). It is not uncommon for a large corpora - tion to have a glitch and be late paying property taxes, and this could affect your building if not caught in an appropriate time frame. If an investor is going to be placing their entire 1031 ex - change proceeds or cash alloca -

tion in one net lease property, there are key points that an investor should understand prior to investing: • Concentration Risk – Plac - ing all of your eggs into one basket • Tenant bankruptcies and restructuring – Lease Rejection • Store Closures – “Dark Stores” • 1031 exchange closing risk • Asset and property man - agement responsibilities – un - paid tenant taxes, collecting reimbursements, refinancing, lease term burn off and value erosion, lease renewal and negotiations, legal expenses, insurance issues, etc. continued on page 14A

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