Expert: Mike Fortunato - 4/5/2010

Question
Hey Mike,

I'd trying to decide on which type of property i should focus on.
What is the difference between owning a multi-tenant retail center and a free standing single-tenant retail property? pros and cons, management, tenant issues etc.. Which do you think is better? Thanks.

Answer
The single tenant retail investment is normally less risky (assuming a strong credit-worthy tenant). They are simpler to manage, in that most leases are NNN (meaning the tenant pays for everything).

The multi-tenant retail center is harder to manage, since you'll probably be dealing with a variety of tenants, you would need to administer the various leases, and you'll likely have turnover to deal with. The cash flow can be less predictable for those reasons.

The benefit of the single tenant property is a stable, predictable long term cash flow. The benefit of multi-tenant properties are that there's normally upside potential, since the lease terms are shorter. With the single tenant property, the value of the investment is limited to the income produced by that long term lease already in place, so people who buy that sort of property usually do so for the more stable cash flow.