There is a simple alternative that combines the pleasures of no management with fee simple ownership. It is purchasing a property that is leased to a credit tenant on a long term basis in a great suburban location wherein the tenant self-manages the property. It's generally termed investing in Single Tenant Net Leased Real Estate.

Why fee simple ownership? When you own a property in fee simple - you and no one else, owns it. You are not investing in a corporation along with thousands of others that issues stock. Nor are you investing in a real estate fund such as a blind pool that buys what they want, when they want at what price they want and convince you that everything is great. Compare fee simple to that stock or fund. What is the value in that stock today compared to the underlying value of the assets? There is no relationship whatsoever and that is truly tragic! However, let's say you instead took those funds and bought a free-standing dollar store, surely you've seen many open in the past two years in your area. Ownership of that property enables you to receive rent the first of every month (not a dividend that may or may not be paid). You also, because of the IRS' Passive Loss Rules, would be able to deduct the cost of interest payments on the debt created when you leveraged your purchase; and most likely you would have the ability to depreciate the asset. The interest and depreciation enables one to shelter a good portion of income. Do you get those goodies in a stock? No.

More thoughts on simple. Not having the headaches of management sounds pretty simple and that's because with a triple or double net lease structure the tenant is paying for all, if not most of the costs of occupancy such as real estate taxes, building insurance and common area maintenance such as grass cutting, snow removal and general maintenance to the heating and cooling. Also simple is determining the quality of the tenant that occupies the building as in almost all cases these are national corporations that are continuing to do well in spite of the economy. These are drug stores, dollar stores, branch banks, auto and tire stores and auto parts stores. Even fast food locations. Leases are 10 to 25 years and the majority of the properties being offered today are brand new construction. Generally, in a brand new, just occupied structure not much is overlooked before the tenant takes possession so your due diligence has already been performed.

In conclusion - best practice is always KISS. And yes this also applies to investing in commercial real estate. Fee simple ownership, simple management, computer mailed rent checks, write-offs, credit tenants and A+ locations make this investment type a pretty simple investment decision.

Ned Coyle, CCIM, is an Investment Specialist with concentrated emphasis in the practice of representing buyers of single tenant, net leased properties. These assets are located throughout the U.S. He has three decades of commercial real estate experience and has extensive understanding of valuation analysis and enhancement and has worked on behalf of local, regional and national corporations and banks as well as high net worth individuals and REIT's.

Ned publishes a monthly newsletter on Investing in Net-Leased Real Estate with timely insights on financing and trends in this asset class. The newsletter also contains information on dozens of single-tenant net leased properties currently available. Subscriptions are available for $120 per year by visiting the website at http://www.cbre.com/ned.coyle or http://www.netleasesuccess.com
Ned is a Vice President, Investment Properties with the CB Richard Ellis Group of Companies.

419-794-3953
ned.coyle@cbre.com