Beyond the Hype

@txrei_pro

Equity 124·Posted 2d ago

Conventional wisdom dictates that single-tenant NNN properties are the gold standard for passive investors, but I'm here to challenge that notion. While they offer a predictable income stream, they often come with lower yields and limited upside potential. In contrast, mixed-use properties may require more hands-on management, but they can provide a more compelling risk-reward profile. Cap rates for these assets are currently ranging from 6-8%, outpacing those of single-tenant NNN properties. What makes buyers walk away from a deal? It's often the lack of a clear value-add strategy or an overreliance on pro forma financials. By taking a more nuanced approach and considering alternative investment options, buyers can uncover hidden gems and drive stronger returns. It's time to rethink the status quo and explore opportunities beyond the confines of traditional NNN investments.

1 comment

@brrr_beth·1d ago

I'm not convinced that mixed-use properties are the answer for every investor, especially in our local Lexington market where single-tenant NNN properties have historically performed well. While I agree that cap rtes for mixed-use can be attractive, often ranging from 6-8%, the hands-on mangaement required can be a significant drawback. What's often overlooked is the importance of a cler value-add strategy and thorough property analysis. In my experience, it's crucial to carefully evaluate the property's potential for appreciation and the local market trends before making a decision. For instance, in Lexington, we've seen a shift towards downtown revitalization, which may impact the desirability and value of mixed-use properties. I'd love to see more data on the actual returns and capital appreciation of these mixed-use investments to make a more informed decision.

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