JF 3884: Triple Net Wins, Dollar Stores, and Lease Nuance ft. Tom Rauen
Apr 23, 2025
47:07
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Quick takeaways
Tom Rauen emphasizes the importance of thoroughly reviewing lease agreements and understanding local market nuances to mitigate investment risks.
The podcast highlights the significance of a balanced investment strategy, encouraging diversification between passive and active real estate opportunities for sustainable growth.
Deep dives
Investment Opportunities in Hendersonville
The Hamilton, a 232-unit multifamily community in Hendersonville, Tennessee, is presented as a prime investment opportunity due to its strategic location within a high-demand market. The area features top-rated schools and strong demographics, which are expected to drive exceptional rent growth with minimal new supply anticipated. With a current occupancy rate of 97%, the property already generates cash flow, and plans are in place to increase rents by over $300 while remaining competitive with local market comparables. This combination of limited inventory and burgeoning demand creates favorable conditions for long-term investment appreciation.
Triple Net Lease Structure
The podcast provides an in-depth overview of the triple net lease (NNN) model, where tenants are responsible for covering property taxes, insurance, and maintenance. It is explained that not all NNN leases are the same; some variations require landlords to pay certain expenses before billing them back to tenants, which can lead to confusion especially for new investors. A distinction is also made between standard triple net leases and absolute triple net leases, the latter being more hands-off for landlords. The importance of carefully reviewing lease structures is emphasized, suggesting that investors should not solely rely on brokers but also review the leases themselves.
Navigating Leases and Tenant Reliability
The discussion highlights the significance of thoroughly assessing lease agreements and tenant reliability, particularly in light of recent economic shifts post-COVID. Investors are encouraged to examine details like early-out clauses or adjustments impacting rental obligations due to government shutdowns. It is advised that investors maintain a hands-on approach by reviewing leases to catch any potentially costly oversights that may not be apparent even to legal counsel. Furthermore, the podcast dives into strategies for evaluating the long-term viability of tenants, including monitoring store traffic and interviewing staff to gauge operational stability.
Value-Add Strategies in Real Estate Investments
The importance of a balanced investment strategy is discussed, emphasizing the value of diversifying within asset classes and seeking both passive and active opportunities. Investors can identify potential value-add properties requiring significant renovations that can yield better long-term returns while also acquiring low-maintenance assets that are cash-flowing. The approach includes examining market conditions, such as cap rates and interest rates, to make informed decisions on whether to hold or sell based on asset performance and market timing. With a preference for properties in the $1 million to $5 million range, the strategy focuses on sustainable growth with predictable returns, appealing to both risk-averse and growth-oriented investors.
On this episode of the Best Ever CRE Show, Amanda Cruise and Ash Patel interview Tom Rauen, the self-branded "Fast Food Landlord" and owner of Rauen Capital. Tom shares his strategy behind acquiring Triple Net lease assets—primarily dollar stores and fast food locations—in underserved Iowa markets. He dives into the nuances of lease structures, investor returns, and risk mitigation, emphasizing why lease review and local knowledge are key. Tom also discusses the pitfalls of trendy business acquisitions, warning real estate investors about the operational complexity behind buying small businesses.
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