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Investors have been very interested in the safe returns of the net lease sector, but zero cash flow triple nets—a special loan that falls under the 467 IRS code where the rent from the tenant equals the loan payment, creating a zero net income and tax advantages—has been suffering as a result. Faris Lee Investments director John Redfield believes you should be giving more attention to zero cash flow, since it may have tax advantages and income-producing opportunities as time goes on.
“Due to the minimal down payment, high creditworthiness of the tenant and no management responsibilities, they are great opportunities to passively grow wealth and wholly own a secure investment at the maturity of the loan,” Redfield says.
You’ll need strong credit to pull it off, and Redfield points to 1031 buyers, private individuals (who want to build trusts and long-term securities for their families), CVS (pictured) and Walgreens as ideal candidates.
The tax benefits at the beginning of the ownership period can be super-beneficial for the first 10 to 15 years, but the owner needs to be aware of the loan’s structure. The market for these zero cash flow opportunities is still very hot, and, with proper diligence, you can reap a heavy profit.[GS]
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