Anyone have good reading material pointing out the risks around nnn investing?
I am considering diversifying and getting into commercial real estate if I can sell my primary residence to move to a cheaper COL place.

NNN on national chains seems like the lowest risk path to go and would still net me some great tax benefits.

If I could find a decent cap rate with some corporate guarantees...what is my downside short and long term?

I don't plan on quitting my day job yet so I'm not looking for anything very active.  NNN just jumps out as a slam dunk way to diversify and lock in some good gains with a chance at appreciation.  Feel free to call me naive...but at least tell me why ;)
[{"id": "dzbejib", "text": "Downside is that we are at the end of a cycle.  Interest rates rising, cap rates will follow suit.  NNN deals are like bonds, value inverse to rates.\n\nPlus side.  Safe cash flow, corporate guaranteed lease revenue, tax advantaged income.\n\nReally need to do your due diligence though right now.  Location, lease terms, healthy rent-to-sales.  Maybe go for deals with guarantors that don't meet typical investment fund criteria (smaller franchisee/high net worth individual guarantee as opposed to corporate entity) as long as they are well-located with good economics.", "replies": [{"id": "dzbgb2n", "text": "I appreciate the response.  I was looking at McDonald's and Starbucks and their 4 percent cap rates just didn't add up for me.  \n\nI saw a smaller fried chicken franchise that was guaranteed by a guy who ran 56 of them or something.  That seemed pretty safe for me but might slip through the due diligence of bigger investors?  Good thought.  \n\nI live in Seattle and if you go to the east side it's staggering how much vacancy exists in more standard commercial properties.  I'd be scared at what happens in a bust!  ", "replies": [{"id": "dzd6ut3", "text": "I see both types it deals all day \nI'm with you", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "dzbg7x3", "text": "Depends if it's single-tenant or multi-tenant. Lease rollover is your short term or long term risk. You must also consider your residual value - which is a risk at this time in the cycle - that's why a quality location is critical, so you can count on demand being there to backfill the property with a new tenant should some tenant vacate (especially if it's single-tenant). \n\nOther than that you're on the hook for the structure and the roof, so do your DD thoroughly and get a solid insurance policy. ", "replies": [{"id": "dzbge3d", "text": "How easy is it to reconfigure some of the more purpose built type establishments like a Starbucks or fast food place?  The ground lease variety kind of places seem like tougher remodels vs more warehouse style places.  ", "replies": [{"id": "dzbwf69", "text": "Very difficult unless you\u2019re able to leverage debt for TI. The tenants that desire those spaces dictate the remodel. You will have a hard time enticing a quality tenant with a white box. Not worth your money until you find an interested party. ", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "dzbgjn1", "text": "Here are a few blog posts I wrote that cover basic topics on Net Leased investing. \n\n[What Are Net Leased Investments?](https://bigplayproperties.com/blog/2018/3/28/what-are-triple-net-leased-investments) \n[What Are the Typical Returns From Triple Net Leased Investments?](https://bigplayproperties.com/blog/2018/3/31/what-are-the-typical-returns-from-triple-net-leased-investments) \n[Financing Net Leased Commercial Real Estate](https://bigplayproperties.com/blog/2018/4/7/financing-net-leased-commercial-real-estate) \n[Single Tenant Net Leased Property Types](https://bigplayproperties.com/blog/2018/4/10/single-tenant-net-leased-property-types) \n\nHopefully this helps.", "replies": [{"id": "dzdfcsa", "text": "Thanks!", "replies": [], "depth": 2}], "depth": 1}, {"id": "dzcw75w", "text": "I like this one\nhttp://www.creonline.com/risks-and-benefits-of-triple-net-properties.html", "replies": [{"id": "dzdfk3p", "text": "I like the analysis especially default risks but I wish that they would update it for more of today's figures.  It has this for instance\n\n\"Prices start in the range of a 6% cap rate for the highest rated tenants, up to perhaps 8.5% - 9% for lesser credit quality or those with short lease terms.\u00a0\"\n\n9 percent?  Sign me up :)", "replies": [], "depth": 2}], "depth": 1}, {"id": "dzec17n", "text": "How many NNN deals can you do? You'll have concentration risk if it's only 1 or 2 \\(both geographically and company\\). NNN is typically an easy sell because they are low maintenance, low risk, hence the cap rates. I wouldn't count on appreciation. Interest rates are moving against you. ", "replies": [{"id": "dzew3ab", "text": "I could afford to do one or two now depending on cost but it does feel like a lot of eggs in one basket.  \n\nIt might be worth waiting for the cycle to cool a bit but I'm trying to do my research now so u could be ready to move if the climate changes", "replies": [], "depth": 2}], "depth": 1}, {"id": "dzekwsz", "text": "When you say NNN investing, can you elaborate on what you mean?  Will you be buying the properties 100% or just investing equity with another owner?  Are you talking about single-tenant properties, Or do you just mean retail in general, which is usually the only thing leased NNN?\n\nAs for NNN on national chains, I think what you\u2019re describing is purchasing existing retail real estate with a single tenant in place.  Most national chains are what are known as \u201ccredit tenants\u201d because they are unlikely to default and because they will have an actual credit rating from Moody\u2019s/etc (for example, Cellco (Verizon) is a credit tenant).  In that case you\u2019re buying a stabilized/mature/core asset which is basically like buying a bond.  \n\nIf you want potential for more appreciation you want to look at upside potential and downside potential.  For example a property zoned for 10,000 SF with a 2,000 SF building on it has upside potential, whereas a property which is already at maximum utilization has only downside potential.  \n\nDisclaimer: I\u2019m not a full-time professional. \n\nEdit: also beware the term \u201ctriple net,\u201d it doesn\u2019t mean as much these days.  Leases can be structured in any way with any amount of items passed through to the tenant.  If you\u2019re talking credit tenants, they will hold most of the cards in the negotiation of any renewal etc, and you will probably have to agree to their lease form and terms. ", "replies": [{"id": "dzhmlk4", "text": "I was picturing doing either a ground lease or a fee simple lease (I think those are the right terms) on a national chain like a Starbucks or something that has some kind of Corp guarantee.  I'd want to own the land in the end.  \n\nYour point about being careful not to only take on a project with downside risk and no upside is one I hadn't considered...I e just getting one part of a strip mall.  Even if there is a good tenant, the next tenant may not pay nearly as much.  \n\nThanks for the well thought out response!", "replies": [], "depth": 2}], "depth": 1}]