Frequently Asked Questions
Is the income stream quoted accurate?
Yes. When you purchase a CRE2U property you get your portion of the guaranteed lease stream. So, if a property is producing a 6% income stream and you purchase 10% of that property you will receive 10% of that income stream thus a 6% return on your investment. Additionally, you also receive 10% of the tax benefits, and market appreciation.
Are there any Hidden Costs?
Commercial tenants in a triple net lease pay most all anticipated expenses including property taxes, insurance, utilities, and regular maintenance. Some unforeseen long term costs such as roof and structure may remain with the landlord and vary by property check your due diligence package. The only anticipated costs to you is the charge for the property manager to send you funds. This is typically $25 per distribution. You can choose to take funds at any increment between monthly and annually. Additionally, the property manager will charge an annual fee of $35 to prepare your 1099 for tax purposes.
What does “Investment Grade Guarantee” really mean?
The term “Investment Grade Guarantee” refers to the credit rating of the corporation that has guaranteed the lease. In some instances that is the same company that is occupying the space. Often, we secure a guarantee from a parent company that may own multiple related brands or companies. By having an investment grade guarantee a company with a high-quality credit rating has guaranteed your payment. These companies can issue investment grade bonds that trade as commercial bonds on Wall Street. The default rates by these companies are very low. Even in the worst economic downturn in recent memory 2008 and 2009 the annual cumulative default rate for investment grade bonds did not even approach one half of one percent. Since 2010 (2015 was the last year of reporting when this was written) there has not been an investment grade bond default anywhere in the world.
Who manages the property?
We have arranged for a company with extensive experience in Tenant In Common properties to manage your real estate. This company serves at the pleasure of the owners and can be changed at any time by a majority vote of the owners.
What is the exit strategy?
Each co-owner has a separate deeded interest in the property and can buy and sell their interests as real estate independent of other owners. Every NNN leased investment, whether purchased as a Tenant In Common or as the sole owner, should be purchased as part of a long term investment strategy. But, as Robert Burns wrote, even “the best laid plans... can go awry”. Because CRE2U keeps low minimums and markets to middle class retirement investors we anticipate securing multiple retirement account investors in our properties. These investors have been coached to utilize a roll-up strategy whereby they leave their cash in their retirement account and compound their investment when additional shares of their investment property become available. There are no minimums on exchanges within a property.
CRE2U will facilitate these deed modifications and charge no marketing fees. If after your shares are offered to your partners and you still have a portion of your investment left to sell on the open market. CRE2U will market your property on our sales platform for a discounted listing fee of 3%. CRE2U is committed to maintaining the best resale program in the industry.
Does this qualify as a 1031 replacement property?
Yes, CRE2U properties are the perfect 1031 exchange properties for small investors or for left over funds (Boot) from large exchanges. Because you can choose the exact amount to purchase you can cover the precise amount of your relinquished property. We are not CPAs or Attorneys we urge you to seek consultation from qualified advisors on all tax and investment issues.
Can self-directed retirement account funds be used to purchase a CRE2U property?
Yes, because we only sell 100% debt free properties CRE2U properties do qualify to be placed in self-directed IRAs or 401Ks.
How is a typical IRA converted into a self-directed account?
We work with multiple national high-quality Retirement Account fiduciaries that can assist you in transferring your funds to a self-directed account. It is almost as easy as a phone call.
How is a purchase executed?
Every CRE2U transaction is treated with the same care and attention to detail that would occur in a typical $10 million commercial investment real estate transaction. After you have reviewed the Offering Memorandum and decided to proceed we enter into a Purchase and Sale Agreement. Once the property is under contract all the detailed source documents that are referenced in the Offering Memorandum are made available for your review. Once you are confident you want to proceed we make an appointment for you with Old Republic Title. We have associated with this national title company to provide title insurance (at our costs) and reduced administrative fees shared by us. Because our properties are debt free you have very few documents to sign. Outside of the Purchase and Sale Agreement you will also be required to sign a Tenant In Common agreement that sets forth your relationship with the other owners and a Property Management agreement.
How long does the purchase process take?
Once you decide you want a CRE2U property the closing can usually occur the next day. Your specific appointment will take about 30 minutes.
Who makes decisions about the property?
The owners make the decisions. Their communication is facilitated by the property manager. Because there is a long term, NNN lease in place when you purchase there are in practice very few decisions to be made. The tenant-in-common agreement executed at closing outlines the relationship among the co-owners and how decisions are to be made.
What happens if the tenant fails and files bankruptcy?
Because CRE2U typically invests in properties that have Investment Grade Guarantees default rates are virtually nonexistent. However, in the case of a catastrophic failure of both the tenant and guarantor your income stream would be interrupted. Because there is no debt on the property there is no risk of a lender foreclosure.