The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful:
While triple net real estate investment requires less day to day execution risk, and allows you to be a more passive investor, that doesn’t mean there isn’t comprehensive strategy involved. Investors get to choose their level of strategy and involvement, and they get to oversee properties in a way that they wouldn’t be able to with a multifamily property or office park. Location development, rental increases, and financing or lease terms can all impact the return on your triple net commercial real estate investment.
Richard Wilson: Right, right, so if I’m understanding right it’s almost like it allows you to be a little more passive of an investor with triple net versus if you own an office park or multi-family property, right?
Peter Von Der Ahe: Yeah, that’s exactly part of it, and that’s one of the main drivers is that there’s less day to day execution risk. If you had to be very, you know, kind of like the negative stereotype is “Oh, this is, this asset class you’re just buying a bond and they’re bad investments…” but when you get into the, just like anything, when you learn more about it and you explore the asset class further, there’s a whole bunch of triggers and ways to add value that are all dependent on how you structure things, how the location develops what’s happening with the tenant, the increases, the rental increases, are structured, and a lot of it has to do with financing and the lease terms. So, I would say that there is in these type of assets there’s less day to day management, obviously, but that doesn’t mean that it’s completely devoid of any type of strategy.
Richard: Right, yeah, makes sense.