1031 EXCHANGE INTO A NNN ASSET 1031 EXCHANGE STRATEGY #2:
This is where you would 1031 exchange out of, for example, a 15-unit apartment building and 1031 exchange into a building that's occupied or leased
by a company like McDonald's or Starbucks on a long-term basis, typically anywhere from 5, 10, 15 to 20 years.
While many people think that NNN properties are completely hands-off assets and 100% passive investments, they're really not. In many cases, the lease is written so that you, the landlord, pay the property taxes or the insurance premiums and then submit it to the tenant for reimbursement. Even though the tenant is ultimately liable for that property tax payment, sometimes they are terribly slow at honoring those terms of the lease. Finally, another issue with triple net properties is the potential for over-concentration of risk. To make matters worse, if at the end of the lease term, the tenant decides to vacate the building, now you as the owner have to go out and re-tenant that building. Then you are going to have to pay out tenant improvement allowances, leasing commissions, and so on.
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