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Video 5 https://www.youtube.com/watch?v=729DTt54QUQ
There's 3 property categories in Net Lease Investing. We've got Fee Simple, we've got
Ground Leases and weÕve got Lease Holds. What are the differences? Well youÕre probably
pretty familiar with Fee Simple, that is how most people own their homes that is the highest
form of ownership in real estate. What that allows you to do is anything you want on that
property except for zoning. We also want those for long term tenants, what they do is they
could sign, because you own the property in Fee Simple, you could sign a long term lease
with the credit with the tenant. Walgreens is gonna pay you rent for 50 years on that
property you got a contract.
Ground leases are a little bit different and that is where you own just the ground, as
it's pretty straight forward there. So you own the dirt and what happens there is you
collect rent from somebody like McDonalds for example. TheyÕre gonna pay you $50,000
a month for the right to own the dirt. They own the property, they own the building, usually
they own the building. If they donÕt own the building that is called a lease hold interest.
So there is really 3 (three) different types of leases; one you own the property and the
dirt, two you own the dirt and the tenants own the property and the building, and three
you own just the building. There's pros and cons on all of these, with the ground lease
in some ways that is the greatest way to go. You have nothing to worry about you donÕt
own the building, no structure. You're just collecting rent for dirt every month. The
problem is, this is one of the disadvantages you donÕt get depreciation. Depreciation
is pretty important to real estate investing. It is a big tax, it is a big tax consequence.
Something you want to talk to your CPA about if depreciation is important to you, you're
gonna probably not want a ground lease.
Lease hold investments arenÕt common as it's not common at all because usually the tenants
owns the building. But if the tenant doesnÕt own the building the problem with lease hold
investments are you need to make your money in the remaining period of that lease. If
you donÕt then that property reverts back to the ground lease owner. You left with nothing,
so if you donÕt make enough money in let's say, you got 8 years left on the ground on
a lease hold. I wouldnÕt buy that property. But if you got a 50 year, 100 years lease
hold investment, that might be worth taking to look at. The reality is we donÕt deal
with this much. Fee Simple is the way to go. I love the word simple because that is really
what we are talking about here. It's simple investments where youÕre getting your time
back, increasing your cash flow and you're enjoying life. We'll talk more about it but
if you want to learn more go to my website www.beaubien.com. It is B-E-A-U-B-I-E-N.com.
Have a good day!