NNN Pros and Cons — the Unbrochured Version

The brochure version lists pros; the portfolio version prices cons. Both columns, from the buy side of several hundred net lease files.

The genuine pros

Passivity that’s real: on absolute-net paper the ownership job is depositing rent — no 2 a.m. calls, no turns, no operating statements. Credit-backed income: corporate guarantees put institutional balance sheets behind monthly checks — a quality of counterparty residential landlords never see. Predictability: 10-20 year terms with scheduled escalations make retirement math actually computable. Financing appetite: lenders quote net lease daily; leverage is available and standardized. 1031 compatibility: inventory at every price, closings that fit exchange calendars, and management-free landings for tired landlords. Location residue: the corners credit tenants pick retain value beyond any tenancy.

The honest cons

Concentration: one tenant is one point of failure — a vacancy isn’t 5% of a rent roll, it’s 100%. Re-lease cliffs: single-purpose buildings re-tenant at haircuts (drugstores) or hardly at all (car-wash tunnels); the risk guide prices this. Flat stretches: plenty of paper runs years between bumps — real income erosion at 3% inflation. Rate sensitivity: bond-like assets reprice with yields; 2022-24 was the demonstration. Renewal asymmetry: options belong to tenants — certainty runs one direction. Boredom mispricing: the asset class’s calm invites underwriting laziness, and the market charges for it retroactively.

The balance

The cons are all priceable — basis discipline, re-lease math, escalation selection, tenant diversification across a few deals. Which is the honest pitch: NNN isn’t risk-free income; it’s risk you can read, priced in a lease you can hold. Investors who do the reading keep the pros.