1. Location
Does this region of the US have a good history/outlook for this type of investment?
If periodic on-site management is required is it too far away for me or my property manager to give it direct attention?
Does the site (dirt) have good commercial exposure/value without considering the lease or improvements?
2. Tenant(s)
Is the tenant strong? How strong? How do you know?
Is their niche sustainable over the long-haul?
Does the tenant mix compliment the property and the surrounding area?
3. Lease Type
Are there any Landlord responsibilities (roof, structure, parking lot, etc.)?
Will you be delegating the Landlord responsibilities to a third party?
Have you factored the cost of third-party management into your analysis?
4. Lease Term
How long is the base term?
Are there any increases factored into the base term or the option periods?
5. Tax Benefits
Do you have any capital gains from real property that can be applied to this purchased, i.e. a 1031 exchange?
6. Disposition Plan
What is my projected hold period for this investment?
What is my projected sale price at then end of the hold period?
7. Return on Investment
What is my Internal Rate of Return (IRR) in this investment?
What is my Capital Accumulation Rate of Return on this investment?
Compare this investment to other available options
8. Estoppel Letter
Get estoppel letters from each tenant – prove out what you’ve been told on the financials.
9. Local Trends
Is the area trending up or down?
Are their high vacancies?
Is there a lot of new development in the area?
10. Property Condition
Is there any deferred maintenance? How is the daily maintenance going? Trash in the parking lot and piled up behind the property may indicate a problem with tenants or management.
Make sure the real estate broker representing your interests has experience in analyzing NNN investments.
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