Net Lease Case Study: Family Dollar

7/3/2015

If the middle-class investor "saves" money by investing in mutual funds or 401K, then the wealthy and strategic investor "save" money by invest in net lease or triple net lease.

Highlights:

How much monthly fixed income will investor receive if he invest $US 713,800?
What other benefits when USA-investor invest in net lease?
How much risk when USA-investor invest in this net lease, Family Dollars?

Please review our previous blogs:

What Are The Key Data From Net Lease Listing?

Who is your tenant? Family Dollar
How much is asking price: $US 713,800
Where is the location: 1060 South Fayette Street, Beckley, West Virginia 25801
What is the rate of return on your investment (Cap Rate): $US 64,599 (Annually)

You want to reduce your risk by select strong credit tenant with strong net worth $US 100+ million. Also, you make sure the Family Dollars will be a guarantee for your lease payment.

How much monthly fixed income will investor receive if he invests $US 713,800?

The annual return of investment, before mortgage and tax, is $US 64,600. If you invest all cash in this Family Dollar, you will receive $US 5,383 a month. Please note your payment is directly from Family Dollar.

Please note this is a passive income (NOT earning income) which is taxed at lower tax rate. The exact tax rate depends on individual entire financial structure. Please consult with your Certified Public Accountant.

Your potential passive income is $64,600 X 15 years = $US 968,984

What Other Benefits When USA-investor Invests in Net Lease?

Depreciation & Appreciation:  For USA-based investor, you may receive additional benefits such as depreciation and appreciation.

Scalability:  Also, you are NOT involved in daily operations of the Family Dollar neither repair & maintenance. This means you can invest simultaneously in multiple net lease properties and different locations. Therefore, your scalability is limitless. It’s only limit by how much capital you can access.

Re-financeable & Transferable:  You can borrow against it if you need additional cash. You can structure this net lease be transferred to your foundation or business entity at your death event.

How Much Risk When USA-investor Invest in This Net Lease, Family Dollars?

Political Risk: Select country wisely; preferable is located anywhere in USA or United Kingdom
Mother Nature Risk: Make sure your property insurance cover these events
Tenant Risk: Make sure your lease is guarantee by Family Dollar

Conclusion:

If the middle-class investor "saves" money by investing in mutual funds or 401K, then the wealthy and strategic investor "save" money by investing in net lease or triple net lease.

For further discussion, please contact us for our free 30-min confidential consultation.

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Referenced Net Lease Listing: Case Study_Family Dollar NN

Diagram for illustrating of How using a Triple Net Lease To Create a High Taxable Revenue to a Low Taxable Revenue Legally

Typical Scenario: The Digital Online Business (“DOB”) generates average $US 40 million in last 3 years. Since this DOB has very little on overhead and management’s expenses, it is most likely DOB’s revenue will be taxed at the highest tax rate. Its total taxes’ bill most likely is Fifty Percent (50%) or $US 20,000,000.

How can this DOB minimize his taxes’ bill legally and simultaneously increase his asset?

First, the owner of DOB just allocates $US 18 million for investment in the Net Lease or Triple Net Lease commercial real estate (“NNN CRE”).

Step #1: DOB purchases all cash of the 1st NNN CRE for $US 18 million.

Step #2: Refinance after 3 to 6 months of closing of the 1st NNN CRE. The loan amount is approximately 70% Loan-to-value or $US 12,600,000. Please note this is a debt finance, the DOB would not pay tax on this $US 12.6 million.

Step #3: DOB purchases all cash of the 2nd NNN CRE for $US 12 million from his debt finance.

Please note DOB can repeat step #2 and #3 again if he wants to.

After approximately 12 months, DOB creates at least 3 favorable and strategic objectives?

Create a passive residual income approximately $US 1.1 million annually
Create an asset’s value is approximately $US 30 million
His total taxes’ bill is reduced at least Fifty (50%) percent to $US 10 million from $US 20 million.

Please note this NNN CRE strategy can work with lower initial investment. We recommend the minimum is $US 1 million for the time and efforts involving and executing these steps. There is no maximum amount; however it will be fewer selections of NNN CRE once its purchase price begins from more than $US 100 million. Therefore, this investor should anticipate a little bit longer. We would say about 24 months it is more realistic time frame.

For further discussion, please sign-up for our free 30-min confidential consultation.

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