NNN REIT (NYSE: NNN) is a publicly traded net lease REIT, and owning its shares is a simple way to own an interest in a diversified portfolio of single-tenant properties. Investors with enough capital often ask whether buying a net lease property directly would do better. The answer depends on the investor’s capital, tax situation, need for liquidity, and tolerance for concentration in one tenant. This page compares a BBB bond, NNN REIT shares, and direct ownership with stated assumptions, and covers the tax rules that drive the difference. For tenant credit, see the investment grade tenant ratings database.
NNN REIT at a Glance
| Measure | NNN REIT (as of June 30, 2026) |
|---|---|
| Properties | 3,774 in all 50 states, D.C., and Puerto Rico |
| Leased | 99.1% of properties |
| Weighted average remaining lease term | 10.1 years |
| Largest lines of trade by rent | Automotive service 18.6%, convenience stores 15.9%, limited-service restaurants 7.7%, entertainment 7.3% |
| Quarterly dividend | $0.62 per share ($2.48 annualized), declared July 15, 2026 |
| Dividend record | Annual dividend increased for 36 consecutive years through 2025 |
Sources: NNN REIT Form 10-Q for the quarter ended June 30, 2026, its second quarter 2026 earnings release (Form 8-K filed August 5, 2026) and Form 10-K for 2025. NNN REIT states that it maintains investment grade credit ratings. The dividend yield depends on the share price; check a current quote.
NNN REIT’s dividend record is long, but its adjusted funds from operations (AFFO) per share has not risen every year; it declined to $2.51 in 2020 from $2.80 in 2019, for example. Past dividend increases do not guarantee future ones.
REIT Shares vs. a BBB Bond
As of October 1, 2026, the ICE BofA BBB US corporate index yielded 6.19% and the 10-year Treasury 5.24%. A fixed-rate bond pays a set coupon and returns principal at maturity if the issuer does not default. A REIT dividend can grow with rents and acquisitions, but the share price moves with the stock market and interest rates, and the dividend can be cut. Under some assumptions, NNN REIT’s total return may exceed a BBB bond’s over a multi-year hold; under others, such as a falling share price or a dividend cut, it may fall short. They are different risks: a bond is a debt claim on one company, and REIT shares are equity in a leveraged real estate portfolio.
One Full Year of After-Tax Cash: An Illustration
| Investment (one full year) | Pre-tax cash | Taxable income | Federal income tax and NIIT | After-tax cash |
|---|---|---|---|---|
| BBB corporate bond, $1,000,000 at 6.00% | $60,000 | $60,000 | $24,480 | $35,520 |
| NNN REIT shares, $1,000,000 at a 5.50% dividend yield | $55,000 | $44,000 after the 20% Section 199A deduction | $18,370 | $36,630 |
| Direct NNN property, $1,000,000 all cash at a 7.00% cap rate | $70,000 | $49,487 | $20,191 | $49,809 |
| Direct NNN property, $3,000,000 at a 7.00% cap rate with a $1,950,000 loan (65% LTV) and $1,050,000 of equity | $62,096 | $22,353 | $9,120 | $52,976 |
Illustrative assumptions: a 37% federal rate plus the 3.8% net investment income tax (40.8% combined), no state tax; all REIT dividends treated as ordinary REIT dividends eligible for the 20% Section 199A deduction (which the One Big Beautiful Bill Act made permanent); direct property NOI equals the cap rate times the price, with 80% of the price allocated to the building and depreciated straight-line over 39 years without cost segregation; the loan is a 30-year amortizing loan at 6.50%, so year-one debt service is $147,904 and interest is $126,108. Depreciation is shown for a full year; in the year a building is placed in service, the mid-month convention allows only part of a year (IRS Publication 946). Rental income is treated as passive. Leverage raises both potential return and risk, so the leveraged row is not directly comparable with the unleveraged rows. The table ignores transaction costs, property-level costs not covered by the tenant, rent changes, price changes, and taxes on sale.
Two things drive the gap for direct ownership in this example: the higher assumed income yield and depreciation, which shelters part of the rent from current tax. Depreciation is not permanent savings: on a taxable sale, gain from straight-line depreciation on the building is generally taxed at up to 25% (IRC 1(h)(1)(E)), and gain on cost-segregated personal property is generally recaptured as ordinary income up to the depreciation taken (IRC 1245(a)). A 1031 exchange can defer that gain, but recapture can still apply in an exchange (IRC 1245(b)(4), 1250(d)(4)). Change the cap rate, loan rate, or tax situation and the result changes; with a loan rate above the cap rate, leverage reduces cash flow.
Cost Segregation and Bonus Depreciation
A cost segregation study can reclassify part of a building’s cost into 5-, 7-, and 15-year property, which may qualify for 100% bonus depreciation if it is qualified property acquired and placed in service after January 19, 2025, subject to the eligibility rules and available elections (IRC 168(k), as amended by Pub. L. 119-21, the One Big Beautiful Bill Act; IRS Publication 946). The share of basis reclassified varies widely by property type and should be supported by a well-documented cost segregation study. Land, including the land under a ground lease, is not depreciable. See our cost segregation guide.
Whether accelerated deductions can offset income beyond the property depends on the passive activity rules. Rental losses are generally passive (IRC 469(c)(2)). An individual who actively participates in a rental real estate activity may use up to $25,000 of such losses a year against other income. That allowance is reduced by half of modified adjusted gross income above $100,000 and is gone at $150,000; a married individual filing separately who lived apart from their spouse for the entire year gets no more than $12,500, phased out between $50,000 and $75,000, and one who lived with their spouse at any time during the year gets none (IRC 469(i); IRS Publication 925). Beyond that allowance, to deduct rental losses against wages or business income an investor generally must qualify as a real estate professional (more than half of personal services, and more than 750 hours, in real property trades or businesses in which the investor materially participates) and must also materially participate in the rental activity (IRC 469(c)(7)). A real estate professional may elect to treat every interest in rental real estate as one activity; material participation is then tested for that combined activity, and the election does not by itself establish material participation (IRS Publication 925). Net lease properties often require little management, which can make material participation hard to establish. Other limits, including the at-risk rules and the excess business loss limitation, may also apply. A tax advisor should confirm eligibility.
1031 Exchanges and Basis at Death
A direct owner can defer gain on a sale by exchanging into like-kind real property held for business or investment use under Section 1031 (IRC 1031(a)(1)), and can repeat exchanges over time. Since 2018, Section 1031 applies only to real property, and REIT shares are securities, so they cannot be exchanged under Section 1031. At death, inherited assets, whether directly owned real estate, REIT shares, or bonds, generally receive a basis adjustment to fair market value, subject to exceptions such as income in respect of a decedent (IRC 1014(a) and (c)). The meaningful difference for direct real estate is the ability to combine repeated 1031 deferral with that basis adjustment.
The Tradeoffs
- Concentration. A single property depends on one tenant. NNN REIT spreads rent across thousands of properties and many tenants.
- Liquidity. REIT shares trade daily. Selling a property usually takes months, with transaction costs.
- Lease obligor. Two properties with the same brand can carry very different credit. A lease signed by a corporate Taco Bell entity differs from a lease signed by a franchisee, even at the same cap rate; confirm the tenant entity and any guarantor in the lease.
- Capital threshold. A single property requires far more capital than a REIT share purchase; investors without enough equity for a suitable property may find REIT shares the more practical route.
- Financing. Investment property is usually financed with conventional lenders such as banks, life companies, and CMBS lenders. SBA programs are generally for owner-occupied operating businesses, not passive landlord investments; SBA rules list passive businesses owned by landlords that do not actively use or occupy the assets as ineligible (13 CFR 120.110(c)).
Who Each Option Fits
Direct ownership tends to fit investors with enough equity for a suitable property, a long holding period, a 1031 exchange or other reason to own real property, and the capacity to underwrite one tenant and one property. REIT shares tend to fit investors with smaller amounts, a need for liquidity, or a preference for diversification and no management. Some investors use both.
Considering a Direct NNN Purchase or 1031 Exchange?
Find it: on market and off market net lease properties matched to your criteria. Fund it: acquisition financing through our lender relationships. Analyze it: tenant credit, lease terms, guarantor, and comparable pricing, with ratings from our database of 190 net lease tenants. Exchange it: identification strategy and timelines built around the 45-day and 180-day deadlines.
On the majority of transactions, there is no separate fee to you as the buyer for representation; the listing broker pays a cooperating commission. Where one is not available, any compensation is agreed with you in writing in advance.
Frequently Asked Questions
Is NNN REIT better than owning NNN property directly?
It depends. REIT shares offer diversification, liquidity, and low minimums. Direct ownership offers control, depreciation on your own return, and 1031 exchange eligibility, with concentration in one tenant and less liquidity. Which produces a better after-tax result depends on your capital, financing, tax situation, and the specific property.
Does NNN REIT grow AFFO every year?
No. It has increased its annual dividend for 36 consecutive years through 2025, but AFFO per share has not risen every year; it declined in 2020, for example.
Can I 1031 exchange REIT shares into a property?
No. REIT shares are securities, not like-kind real property. In a taxable account, selling them is generally a taxable event, after which the proceeds can be invested in a property; Section 1031 covers only real property (IRC 1031(a)(1)).
Do inherited REIT shares get a step-up in basis?
Generally yes, as do inherited real estate and bonds, subject to exceptions. The distinctive feature of direct real estate is the ability to defer gains repeatedly through 1031 exchanges before that basis adjustment.
Can depreciation from an NNN property offset my W-2 income?
Often not. Rental losses are generally passive. Apart from an allowance of up to $25,000 for individuals who actively participate, which phases out as modified adjusted gross income rises from $100,000 to $150,000 and is smaller or unavailable for married individuals filing separately (IRC 469(i); IRS Publication 925), offsetting wages generally requires qualifying as a real estate professional and materially participating in the rental activity, or in the combined activity if the election to treat rental real estate interests as one activity is made (IRC 469(c)(7)), which can be hard to establish for a net lease property. Other loss limits may also apply; ask a tax advisor.
Can I use an SBA loan to buy an NNN investment property?
Generally not. SBA programs are designed for owner-occupied operating businesses; passive investment properties are usually financed with bank, life company, or CMBS loans.
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