Are you in your 45-Day Identification Period? If so, then you may want to pick up some pace and find a highly profitable replacement property for your 1031 exchange. Finding an ideal replacement for your relinquished property isn’t that easy. It may require a strenuous effort from your end. Before you begin your search, it’s important that you decide what kind of investment property you want to acquire. 1031 investors get different options when it comes to closing on the replacement property. You can invest in a DST, TIC, or NNN properties and complete your 1031 exchange. For maximizing cash flow, NNN investment is a good option to go with.
What does NNN Investment offer?
Everything an investor could dream of come with NNN investment. Relief from property management, increased cash flow, tax advantages, and so on. NNN investment provides all these benefits. A NNN lease, pronounced as a triple net lease, is a single-tenant arrangement that requires the tenant to pay all operating expenses associated with the property they’ve rented. Operating expenses the tenant covers under a NNN lease includes insurance fee, property taxes, and maintenance cost.
Difference between Absolute, Double, and Single Net Leases –
Investors can find variation in net leases as not every net lease requires the tenant to pay all three operating expenses. Some net leases may require them to pay one or two additional expenses along with the base rent. Let’s see what happens in different net leases.
Absolute NNN Lease – An absolute NNN lease is a lease agreement that requires the tenant to pay all three operating expenses associated with the property they’ve rented. Consequently, the property owner doesn’t need to spend anything from their pocket and are just responsible for bookkeeping.
Double Net Lease – Under a double net lease agreement, the tenant is required to pay two operating expenses along with the base rent. Operating expenses the tenant covers under this kind of lease includes property taxes and insurance fee. Whereas, the property owner is responsible for paying the maintenance cost associated with the property.
Single Net Lease – No points for guessing. A Single Net Lease agreement requires the tenant to pay one operating expense along with the base rent. The tenant can choose to pay either the insurance fee or property taxes, whereas, the property needs to take care of the remaining expenses.
What 1031 investors get through NNN Investment?
An opportunity to defer capital gains tax comes involuntarily through 1031 exchange. However, one needs a replacement property to complete their exchange. You, as a 1031 investor, can invest in NNN properties and complete your exchange. By doing so, you’ll not only be able to save your income from taxes but will also receive the benefits that accompany NNN investment. With a NNN properties list in hand, you can easily acquire a highly profitable NNN property as your 1031 replacement property.
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