What is a zero cash flow deal?

Zero cash flow deals are deals structured so the property’s NOI goes to service the debt from the lender, leaving nothing left for the owner.

How do you finance NNN properties?

When financing a NNN property, you must have a down payment, typically between 30-40%. To obtain ideal financing for your goals, it’s imperative to buy a property subject to an investment-grade tenant or quality franchisee with a long-term lease guarantee.

Can cash flow zero?

What is a Zero Cash Flow Property? By definition, a true zero cash flow property or “zero” is a highly leveraged asset that is structured so the net operating income (NOI) is equal to the loan payment, effectively producing $0 in net cash flow to be distributed to equity investors.

What does plus triple net mean?

Triple net lease (NNN) A type of commercial real estate lease under which you typically pay the base rent, plus property taxes, building insurance and utilities, as well as other operating and maintenance costs. The landlord assumes no costs, other than those for structural repairs.

Is NNN a good investment?

NNN leases are considered to be one of the most secure investment opportunities. This is because, similar to bonds, single-tenant net-leased properties provide steady and predictable returns over time.

What is a CTL loan?

Credit Tenant Lease (“CTL”) Financing is a method of financing real estate in which the landlord / owner borrows money to finance the development or purchase of a property and pledges as security rent to be received from the tenant and a mortgage on the property.

Why is free cash flow so important?

Free cash flow is important to investors because it shows how much actual cash a company has at its disposal. Free cash flow is the money left over after a company has met its operating and capital expenditure requirements and it can be the best way to differentiate between a good investment and a bad one.

Why does free cash flow decrease?

Free cash flow can also be impacted by the growth rate of a business. If a company is growing rapidly, then it requires a significant investment in accounts receivable and inventory, which increases its working capital investment and therefore decreases the amount of free cash flow.

Is a triple net lease a good idea?

The most obvious benefit of using a triple net lease for a tenant is a lower price point for the base lease. Successful properties with low vacancy rates also make triple net lease attractive for a tenant as the taxes, insurance, and maintenance costs are divided by a greater number of fellow tenants.

Do NNN properties appreciate in value?

As the remaining lease becomes shorter, the property will likely decrease in value. Much of a property’s value is derived from its tenants’ long-term net lease. The sooner those tenants renew their leases, the more stability the property will experience.

Is triple net lease bad?

Drawbacks to a Triple Net Lease There is an inherent danger in using a triple net lease with regards to the unknown. Unexpected and substantial damage to the property could significantly increase your monthly maintenance and repair costs.