Investing in NNN vs Passive New Development

This video compares investment in NNN commercial properties with passive investment in multifamily or mixed-use development projects.

A lot of well capitalized investors are drawn to investing in NNN commercial properties such as a Starbucks or CVS or Chick-Fil-A.

NNN properties such as these are attractive because they are often new or newer high quality assets leased to long term credit tenants, so income is stable, with periodic rent increases built in to the leases. They are more predictable investments and much easier to own than say, buying an older apartment building.

The tenant is responsible for all the maintenance and expenses, so NNN properties are pretty much hands-off investments that don’t require a lot of work to own.

These are often very stable Class A investment properties in great locations , but they aren’t really available to a lot of investors because they generally have price tags of anywhere from a couple million dollars to 5 or $10 million or more.

The trade off is that returns are fairly low with Cap rates of 4.5% to 7%, so investments like these are geared more towards preservation of capital with moderate income, rather than growth.

For well capitalized investors who are seeking growth with higher returns and have a bit higher risk tolerance, passive investment in Class A new construction multi-family or mixed use development projects can be a great alternative. Investing in new development projects with a professional development partner allows truly passive investment in new construction properties in great locations that offer much higher potential returns.