High-Yield Possibilities In Commercial Real Estate
SOURCE: Forbes
A high-yield way to get into commercial real estate can be through net-leases. A net-lease is when a building owner sells the building and then leases it back, typically for a long period of time. The building owners do this as a way to raise cash and yet keep their location and storefront. The new owner will likely have a well-protected stream of income for 20-30 years.
Another way to get into high-yield commercial real estate is through net-lease real estate investment trusts (REITs). These REITs own the actual building rather than the mortgage and do much better on returns than equity based REITs.
Even though most sale-leasebacks involve deals worth greater than $20 million there are still many opportunities for individuals. They can participate by piggybacking since REITs and other institutional net-lease buyers often sell off some of their properties individually. This allows them to turn a profit or balance holdings geographically. Currently, 60% of the 11,000 single-tenant retail outlets available are priced below $2 million.
One investor, Jack A. Diamond, became a net-lease holder for a Checkers drive-through hamburger outlet. He paid $387,000 for one of the Checkers stores that was being sold by Trustreet Properties. "I like the steady income stream and not having day-to-day responsibility" for managing the real estate, says Diamond, a retired building supply executive, who co-owns five other net-lease properties via an S corporation.
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A high-yield way to get into commercial real estate can be through net-leases. A net-lease is when a building owner sells the building and then leases it back, typically for a long period of time. The building owners do this as a way to raise cash and yet keep their location and storefront. The new owner will likely have a well-protected stream of income for 20-30 years.
Another way to get into high-yield commercial real estate is through net-lease real estate investment trusts (REITs). These REITs own the actual building rather than the mortgage and do much better on returns than equity based REITs.
Even though most sale-leasebacks involve deals worth greater than $20 million there are still many opportunities for individuals. They can participate by piggybacking since REITs and other institutional net-lease buyers often sell off some of their properties individually. This allows them to turn a profit or balance holdings geographically. Currently, 60% of the 11,000 single-tenant retail outlets available are priced below $2 million.
One investor, Jack A. Diamond, became a net-lease holder for a Checkers drive-through hamburger outlet. He paid $387,000 for one of the Checkers stores that was being sold by Trustreet Properties. "I like the steady income stream and not having day-to-day responsibility" for managing the real estate, says Diamond, a retired building supply executive, who co-owns five other net-lease properties via an S corporation.
Read full report »
