The Hidden Gem of Commercial Real Estate: Triple Net Leases

The Self Storage Income Machine

Self storage has historically gotten a bad rep for being on the low end of real estate holdings, and while there are still more mom and pop highway storage facilities than ever, professional real estate investors recognize how partnering with operators in ground up self storage development present a bounty of opportunity for interested real estate investors. In this discussion, we cover the finer details and important questions to consider when rating this asset class against others onsite with my good friend Arthur Hood. What's happening, Arthur? Not a lot. Good morning. I appreciate you going to the extreme trouble that you've gone to to create this opportunity for you and I to speak to one another. That was easy. It was easy. I already have the office, so you know, we got the space.  We've got the opportunity. And we definitely have the topic today. But Arthur, before we get into the topic, I want to frame the conversation for you around this avatar that we've created named Stuart. Stuart is a character that we dreamt up to represent the investors that are most likely watching this program today. And most of them listening have built some wealth in the stock market, but they've got capital gains. They definitely have tax exposure. and they're starting to ask a very basic, simple, but incredibly important question. Where does my money go next? So, today we're going to explore an asset class that you are just an absolute expert at, and it's quietly outperformed like almost every other real estate sector for decades. It's self- storage. So, Arthur, man, like you've structured more money in these kinds of transactions than I can even keep track of. Do you have you keep a running total of I I started to look at it one day. I think just over between lifetime of transactions probably just over a billion dollars. There you go. There you have it. So we we'll just clarify that was a B billion over a billion dollars. Not a million. So that's industries but yes. So let me let me just ask you like so we said right like this this group of people they're sitting on a stack of RSUs right they've got the opportunity really to create some leverage from the income that they've created that's largely sitting dormant so we've in the capital shift what we talk about a lot is this idea of needing to change the way you think so that you can change the way that you invest. So from your perspective when people are starting to explore real estate as an investment vehicle like what's the first big mental shift that they need to make? Uh the the the first big mental shift anyone needs to make especially switching to a real estate investment is that it's not a true liquid investment. There is a somewhat of a cost to get in, cost to get out as far as selling trans or selling a property, buying a property, but long-term you're going to get depreciation, the ability to use leverage, which you really can't use in the stock market unless we get into leverage and a bunch of high risk involved in that, right? So you can do those items is the biggest shift is if you've got a million dollars in stocks, if you want a million dollars in cash, you can have a million dollars in cash the next day wired to your bank account by day two. You can't really do that with real estate. However, you can still get liquidity, but you have to borrow against your real estate. But then that's a that's a tax-free transaction. And that, ladies and gentlemen, is what many of you are after. So, if that catches your attention, you're going to want to pay close attention to the rest of what we're going to talk about today. So, a lot of times, uh, Arthur Stewart as a character, he's got a mental construct that he needs to break down before he or she can really make this change that you're describing. So, what do you think is the one big belief that investors are stuck with that keeps them rooted in the stock market and really not considering what we're talking about? I think the one of the things that keeps people rooted in the stock market is just the ease. It's click of a button. They don't have to think or do anything. Real estate seems complicated from the outside if you've never done it before. However, for me, I'm a lot more comfortable with real estate. It's a hard asset. I can touch it. I can feel it. Um, regardless of what happens to the US dollar, it will be paid for in some form or some currency. So, if the dollar was to ever just crash and burn, real estate will trade in some form of a currency, gold, it doesn't matter, but it'll it'll maintain its value. Amen. And if you haven't given consideration to that thought, there's a foundational aspect for you to really spend some time thinking about uh putting into your favorite AI engine to really spend some time in self-discovery around what this process might look for you, but look like for you, but there's definitely something to be had when it comes to this. All right. So, myth is busted, but let's talk about the actual asset class of self- storage itself because I've I've watched some of your other content, you have some really interesting perspectives on self storage as an asset class. So, when the listener when the watcher first hears self storage, for me, I can remember when we first were considering this asset class when you were talking about it and we kind of wrote it off. It's like why would that be an interesting or valuable asset class? So for your perspective like why does that reaction cause people to miss that opportunity? I think a lot of it's because when people think of self storage they think of the old rollup door makeshift building on the side of the highway in a small town, you know, 20 miles from where they live. They don't really see the new generation 5 climate controlled facilities that look like a a medical warehouse. They're beautiful. They're done very well. Concrete floors, stainless steel in the walls, everything's climate controlled. And they also don't realize, you know, if you live in an older home, um, you probably have a fair amount of closet space and some attic space, but if you live in a newer home or an apartment, the builders were never really incentivized to provide a lot of space they weren't going to get a premium for. So, there really isn't that much storage in a lot of new in new places. and and people on, you know, in their 30s and 40s and younger and older all have hobbies, whether it's hiking, kaying, skiing, working out, whatever, bike riding. So, everybody has things that they don't have room to store at home anymore, especially if they live in an apartment or a smaller starter home. They've got to have somewhere to store their stuff. Absolutely. And what we've noticed is home ownership from firsttime home buyers, it's taking them longer and longer and longer to actually be able to buy their first home. So, they've got some more disposable income in many instances because they haven't necessarily found themselves pressured into saving for a down payment just purely out of belief that they're not going to be able to be a homeowner. Secondarily, we're starting to see a lot of build directly to rent product that's hitting the marketplace, which is just going to be a continuation of what you're talking about as far as the builders not really being incentivized to create storage space for the people who are moving into that produc...

The Hidden Gem of Commercial Real Estate: Triple Net Leases

You know recurring revenue. You've sold it, pitched it, and fought for it every quarter. But what if you could own it?   Triple Net Leases — known in the industry as NNN properties — are the commercial real estate equivalent of a contract that auto-renews, where the tenant handles the overhead and you collect the margin. No midnight maintenance calls. No chasing down repairs. Just predictable, long-term cash flow backed by national tenants with serious balance sheets.In this episode of The Capital Shift, NNN specialist Tom Rauen breaks down an asset class that most high earners have never considered — not because it's too complicated, but because nobody ever explained it in plain language.  If you've been stacking W-2 income and wondering how to make it work harder without adding another job to your plate, this conversation is for you. In this episode: What a Triple Net Lease actually is — in plain English Why the tenant pays taxes, insurance, and maintenance (and why they're okay with that) How to evaluate a deal like an investor, not a landlord The tenant creditworthiness question that separates good deals from great ones What high-income earners get wrong when they first enter this space 🔔 Subscribe and hit the bell — new episodes drop regularly on The Capital Shift. Show Notes: which is the overarching premise of the capital shift program, Tom Rowan, which is this notion of as you are more successful over the course of your career, you have more resources than you may have had when you first started. And so consequently as your resources grow and improve your thinking has to change from being a capital accumulator to being a capital deployer. As you are going through that metamorphosis, you actually are going through a bit of an identity change in the process. So hence the name the capital shift program. So welcome Tom. Happy to have you. >> Yes, glad to be here. So you want to tell all the stewards out there a little bit about Tom and your background and how we found ourselves on this happy program today? >> Yeah, for sure. So I found it 1800 t-shirts 20 years ago right out of college. And so that's been my primary job as a a small business owner, as an entrepreneur, uh growing that business now to 40 employees and you know pretty pretty full staff. And during that process, as we were continuing to build the business, we were running into a lot of problems entrepreneurs have is um we were making great money, but the tax man would come knocking out the door. So, I knew, you know, a lot of very wealthy people use real estate as a vehicle to create passive income. And the other part was like as a business owner, entrepreneur, like I wasn't sure what retirement looked like, whether that was an age or money amount or something. And I wanted to have that diversification on hand to you know kind of have a back stop I I guess you could say but then also to you know be earning some passive income um you know besides that and building some wealth in the background. So we started investing in commercial real estate primarily triple net lease focused and so that is big names uh so our tenants are like Starbucks and Arby's and Applebee's and national franchises with 10 to 25 year leases and the reason we focus on that asset class is because as like a full-time business owner you know no different than someone else that has a full-time job um I didn't have the time uh to dedicate to dealing with tenants and toilets and all this other stuff. And I'm not like a handy dude. So, I can't I'm I can fix maybe a few things, but I'm not really. So, I didn't want to like be fixing stuff and having to like, you know, deal with like I don't even like to fix stuff around our own house, let alone somebody else messing it up, right? So that's how we found this asset class and it's absolutely phenomenal asset class because I truly believe it's the only passive asset class that's out there. The rest of them are actually a lot more work. Um this is the only true one that you can set it and forget it and you know there's there's not all these other things going on. So that's that's why we love this asset class. It worked out really well because we could build our lifestyle around it, whether that's with work or with family or traveling and everything else. And as we look towards the future of, you know, retirement and things like that, this asset class still offers all that freedom and flexibility. >> Well, and unlike some of the other operators and the other classes that we've interviewed as a part of the program, there's weights and balances. you know, we're we're teaching the that are consuming this product how to learn the four different sort of measures that someone who's making a real estate investment is generally seeking. And you know, the fun part, Tom, like in many ways, you just described most of the people who are going to be watching the program because they don't have time for another job, just like you didn't have time for another job. They're already doing a lot of work for the thing that makes them the significant amount of money that their jobs afford them. And the idea of taking on a complete other set of tasks seems like the worst possible idea in the world of everything to most of these people because they're putting their heart and souls into what they're doing, you know, in solving problems for their clients. So the idea of then having to take on this added responsibility is just like okay so you've clearly most likely gotten these people's attention around like yeah that sounds exactly right. So break it down a little bit more about why you believe it is truly passive like and and when we say triple net like there may be people who doesn't even know what the heck we're talking about right so let's unpack it a bit for folks who maybe are a little uninitiated. >> Yeah this this got me super excited when you sent me this. So tax efficiency, equity leverage, cash flow creation, capital velocity. >> Yes. >> Now there's some other asset class where you might get one or two of those, >> right? >> I'll tell you what, I don't know the scoring system. Uh looks like a one, two, or three. >> Yeah, >> we're scoring like fives on all those, maybe even higher. Like off the charts. Uh >> all right. talk to the people like what what what makes this so unique that the scores would be so >> here's here's the unique part and I don't like I I kind of like to keep this hush hush because um but I'm going to let you guys in on a little secret. This is truly the best asset class. And the reason it's I call it a secret is because most people don't realize you can actually own these properties. You will never see a for sale sign in front of Starbucks or in front of McDonald's. Right? you're driving down the street, think of when you go to get coffee in the morning or any of the hightra areas in your city, you never see them for sale. So, that's why they're actually they're easy to get but hard to find because people don't know some of the inside tricks on getting these offmarket. They're not listed with, you know, traditional realtors and stuff like that. And typically these are owned by big private equity or big hedge funds and stuff like that. But they're also owned by investors just like you and me. So what these properties look like when I say passive and completely hands...

Short Term Rental Management - Real Talk from Management Pros

Debate rages about the cost v. value of a professional property management partner for your short term rental holdings.  Fouad Bazzi weighed that decision for himself and his personal holdings, and decided the best strategy was to spin up a brand new business dedicated to supporting his own needs as an owner.  The Owner Hosts were born shortly thereafter.  Join us as Fouad talks about his view of the short term rental market, the common traps buyers fall for when jumping in the game, the biggest financial realities of STR ownership and how to keep up with constant changes in the marketplace.

You're Paying Too Much in Taxes : The Magic of Bonus Depreciation

This episode is not tax advice. It’s an educational discussion intended to clarify how mechanisms function, where assumptions often break down, and what tradeoffs deserve more attention before capital moves. Bonus depreciation and the short-term rental tax classification are often discussed as powerful tools for reducing taxable income—but they’re rarely examined in the full context of how they influence real estate investment decisions. In this episode of The Capital Shift, we walk through how bonus depreciation works, why short-term rentals are treated differently under the tax code, and where investors commonly misunderstand the requirements and consequences of using these strategies. The conversation explores how tax efficiency can shape asset selection, operational complexity, and long-term outcomes—especially when the tax benefit becomes a primary driver of the decision.

From RSU's to Real Estate: Converting Stock Grants to Address-Based Assets

With more than 6 years experience accumulating RSU's since joining Google Cloud in 2020, Melisa Burnett joins us for a discussion about her stock-grant strategy, how the laws of compounding worked in her favor and the vehicles she's leveraging in her current stock holdings for the sake of additional real estate assets