Why would I buy this ?
What is the purpose of buying a land that has a lease to lets say "Walgreens" with a cap rate of around 6%. The lease is for a good 10+ years, now what is the purpose of me buying this ? I cant really do anything else with the land since the store occupies all of it, cant really do upgrades and then flip it. 

 Is it a way to make 6% from my money ? Make 6%, wait for it to go up in value and sell ? Takes a while to sell such things.

Sorry for the noob question. I'm just trying to learn and it was difficult to ask the question on google...
[{"id": "exmdf4z", "text": "Yes", "replies": [], "depth": 1}, {"id": "exmeo7h", "text": "I would imagine a place like Realty Income would be interested in purchasing this after a while as well.", "replies": [], "depth": 1}, {"id": "exmfaf6", "text": "Walgreens is a company with decent credit. It typically signs really long leases and if you have a corporate guarantee you essentially have a bond that pays 6% interest. You are also hoping that the asset will appreciate in price.", "replies": [], "depth": 1}, {"id": "exmgrwe", "text": "this is a great investment opportunity. big companies like walgreens, dollar general, cvs are easy tenants. Triple net leases means they pay for their own taxes, insurance, maintenance. even if they go out of biz the corporation still pays your lease. unless the entire corp goes down you\u2019re getting passive income every month for zero work. these leases are typically 15 years long then maybe they renew, maybe they rent to a new tenant, maybe you sell. message me if you need an agent", "replies": [{"id": "exmkcmw", "text": "So what exactly are you responsible for?  Or is my job to just collect rent and pay for the land,", "replies": [{"id": "exmrxvx", "text": "Yep if it\u2019s a triple net lease you just collect rent. Walgreens will pay for everything else.", "replies": [], "depth": 3}, {"id": "exmvuzt", "text": "You\u2019re r responsible for providing the capital and/or paying the debt service.", "replies": [{"id": "exmwbe6", "text": "That makes sense, they pay you to figure everything out.", "replies": [], "depth": 4}], "depth": 3}, {"id": "exnu992", "text": "Depends on the lease structure. You may pay these expenses directly and then invoice the tenant (perhaps quarterly), or, they may pay them directly.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "exmgxv5", "text": "It's just a safe 6% return. Better returns can definitely be found, but if you're looking for something as easy as having the land with 6% returns, then it might be for you.", "replies": [], "depth": 1}, {"id": "exmi750", "text": "Where are you seeing a Walgreens ground lease with ten years left at a 6 cap?", "replies": [{"id": "exnex1d", "text": "You don\u2019t unless it\u2019s bumble fuck West Virginia. Those trade for 4% caps. Probably going tighter now with the 10 year down to 1.6%.", "replies": [{"id": "exo2wxg", "text": "Exactly", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "exmjali", "text": "You get 6% every year, and then at the end you get the land and building if they don\u2019t renew their lease.  If they renew, you still get your 6% or more depending on the lease, and then can resell for more profit because of the longer term.  It\u2019s basically a bond, where at expiration it either renews or you get a property to do what you want.", "replies": [], "depth": 1}, {"id": "exmjl13", "text": "The 6% is assuming you paid all cash. If you leverage with a loan (as most do) your returns will usually be higher as long as your are positive cash flowing after paying off the loan.", "replies": [{"id": "exq5muz", "text": "Why would the returns be higher with a loan?", "replies": [{"id": "exrzxys", "text": "Because you are basically investing less of your own money and your ROI is cash flow divided by your investment.  If you can keep a reasonable cash flow you can increase your ROI. There are whole college courses on this but look up leveraging - that\u2019s basically what this is called.  Using OPM - other people\u2019s money.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "exml5k1", "text": "Look to see how many renewal options they have first.  Most Walgreens have 40-50 years worth of renewal options and the rent doesn\u2019t increase during them. That means that while the value of the building and land may appreciate you really won\u2019t be able to realize that until they stop exercising the flat options.  If you\u2019re looking to grow your money in real estate this isn\u2019t the investment for you. Investors that buy Walgreens are typically looking for a 1031 exchange into a property they don\u2019t have to worry about or manage. It\u2019s also not bad for older investors that are looking to buy real estate they can pass down to their kids that might not be very real estate savvy.", "replies": [{"id": "exnud3j", "text": "Come on. Most of these leases \\*do\\* have escalators with each 5 year option. They may only be 2 or 3%, but they're there.", "replies": [{"id": "exo8u5b", "text": "I was speaking specifically to Walgreens leases, which don\u2019t have any increases in the primary term or renewal options. They have the ability to be paying the same rent 65-75 years from day 1 of the lease. If you buy that lease and go to sell it later the property actually depreciates because the length of term is lower but the rental amount stay the same. The only way you could profit before the renewal options is up is if cap rates go down. But a 6% cap rate is already pretty low for a Walgreens.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "exmm9a7", "text": "Actually, it's an opportunity to make more than 6% Cash on Cash. You can buy it with financing at 4.25% interest and 65% leverage, boosting your IRR to 7.66% and nearly doubling your money in those ten years, assuming NO appreciation.", "replies": [{"id": "exmnk1i", "text": "This should be higher\n\nEdit: I meant the comment, it's spot on. It should be higher up.", "replies": [], "depth": 2}, {"id": "exn2xf1", "text": "I\u2019m a newbie in college trying to learn as much as I can about CRE, can you explain how you got the IRR to 7.66% using only 35% down even though you don\u2019t know the price of the land? I\u2019m a little confused and would greatly appreciate the insight!", "replies": [{"id": "exn4r6k", "text": "Price of the land and net operating income are the components of the cap rate.", "replies": [], "depth": 3}], "depth": 2}, {"id": "exp6g09", "text": "Not sure that math is right. Those loan assumptions mean 9.25% coc, which increases with rent bumps, and assuming no cap rate compression it would still yield an IRR even higher...", "replies": [], "depth": 2}], "depth": 1}, {"id": "exn077n", "text": "It\u2019s a safe, decent return, and no mgmt responsibility. These make wonderful 1031 replacement properties. Say you\u2019re managing an apartment, hotel, or retail center, etc, and you want less mgmt and don\u2019t want to pay cap gains: Buy a Walgreens/similar NNN property and collect your 6% (more if leveraged) and defer the gain.", "replies": [], "depth": 1}]