1. Q: What is a 10-31 Tax Deferred Exchange?
A: An IRC Section 1031 Tax Deferred Exchange is a way to defer capital gains tax contingent upon taking the profit of the gain and investing it in a “Like-Kind” asset. This is commonly mistaken to mean tax free; however, as the name suggests it is merely deferred. Please consult an experienced real estate CPA for further information.
2. Q: What is a Buyer Representation Agreement?
A: A buyers rep agreement as it is commonly referred to is an agreement that outlines the duties owed from the broker to the client and duties from the client to the broker. For example, the duties that may be owed from the client to the broker is loyalty and an agreed upon commission in the event that a seller does not offer one (which they typically do).
3. Q: What does “Triple Net” mean?
A: Triple Net, or NNN as it is commonly referred to, describes the passing of property insurance, maintaince, and real estate property taxes to the tenant(s). Furhermore, the owner who owns a NNN asset has very few responsibilities.
4. Q: Are Triple Net assets risk-free?
A: Triple net asset investment is a low-risk business, but is NOT risk-free. The job of a quality broker, like Michael Taylor, is to minimize the risk of an investment by gathering all of the available data on the property, tenants, and income to ensure it is a stable opportunity.
5. Q: Where do you as a broker find these investments?
A: As a NNN broker, I find many investments via platforms that I am a member of, in addition to networking at local and national events with other brokers. Investments are also discovered via emails from fellow brokers, and other private platforms of which I am a member of, such as CCIM’s Connect; a platform for members and candidate members to exchange deals. In some cases, the best property may not be on the market which is why I maintain a large network of property owners and investors looking to share deals.
6. Q: How are Triple Net assets valued?
A: There are three ways to valuate investment property, but the most common way is by using a Capitalization Rate, a.k.a. Cap Rate. A Cap Rate rate is a valuation method that divides the net operating income by the purchase price; this reflects only a one-year period. You will need more information to project future returns, such as an internal rate of return (IRR). Another method of valuation is the cost to rebuild. Finally, there is the market value method, which finds comparable property.
7. Q: What are the benifits of investing in Triple Net Assets?
A: There are many benefits to NNN investing: 1. tax benits 2. minimal property managment responsibilities 3. minimal risk 4. stable asset 5. the asset can be passed down.
8. Q: How do you as a broker get paid?
A: On the Acquisition side, I typically get paid by the seller. Before I start working for my clients, we negotiate fair compensation that the buyer would pay, in the event that the seller does not offer compensation.
On the Disposition side, I get paid by the seller and I typically offer half of that commission to the buyer’s agent.