Zero Cash Flow Property

A real estate investment where all excess cash flow from a property goes to pay down the senior mortgage. Zero cash flow investments are generally leased to credit-rated, single-tenant NNN tenants, and the loan is sized/crafted such that the debt service equals the lease payments and the loan term and amortization match the lease term.

Much of the benefit of owning this type of property comes in the losses, due to depreciation, over the hold period that offset gains on other investments in an investor’s portfolio. Modeling the taxable losses is essential to understanding the yield of such an investment.

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