How Triple Net Leases Make Out-of-State Investing Actually Passive with Jonathan Hayek

How Triple Net Leases Make Out-of-State Investing Actually Passive with Jonathan Hayek

On Accredited Investors Only, host Peter Neill sits down with Jonathan Hayek to unpack a part of commercial real estate that still flies under the radar for a lot of investors: small single-tenant industrial.

Jonathan did not start in commercial real estate. He started as a special education teacher, then moved into house flips and small multifamily, and eventually shifted into buying industrial properties leased to long-term tenants on triple net terms. The appeal was simple: less management, stronger scalability, and a business model that actually supports financial and geographic freedom.

What makes this conversation especially useful is that it does not stay at the theory level. It gets into the buy box, the lease strategy, what to look for physically in the buildings, how tenant due diligence works when the business is private, and why the current debt cycle may be creating a rare buying window.

From teaching to full-time real estate

Jonathan originally expected to spend his career in public education, put in 30 or 35 years, collect a pension, and retire. That path changed after marriage, when the financial reality became harder to ignore. A teaching salary was not going to produce the kind of freedom he and his wife wanted.

That led him into real estate while he was still teaching full-time. He started by flipping single-family homes during nights, weekends, summer breaks, Christmas break, and spring break. The profits from those flips became the down payment engine for rental acquisitions.

He then began building a portfolio of small multifamily properties. A duplex that cash-flowed around $600 per month turned into a fourplex that cash-flowed around $1,500, then another fourplex after that. Within a couple of years, the rental income started approaching his teaching income.

That was the tipping point.

Leaving a W2 job was not a casual decision. It meant giving up steady paychecks, benefits, and health insurance. But the transition was not from income to zero. By the time he left teaching in 2019, he already had rental income and flip income helping bridge the gap. That made the leap a calculated risk rather than a blind one.

Why flipping was the funding strategy

One of the most practical takeaways from Jonathan’s story is that flipping was not just a business model. It was a capital creation strategy.

On a teacher’s salary of roughly $55,000, there was not enough excess cash lying around to steadily save for down payments. So he and his wife got scrappy. Early on, they used tools like:

  • Credit card balance transfers
  • Zero percent introductory purchase APR offers
  • Friends and family capital
  • Home equity lines where appropriate

That is not the clean institutional version of real estate investing. It is the real version a lot of people start with.

Jonathan and his wife wanted it badly enough to find ways to make the first few deals happen, then turned one deal into the next. That compounding effect mattered more than a perfect starting balance sheet.

Learning by doing in residential

During the early years, Jonathan handled a lot of the renovation work himself. He was handy enough to take on painting, flooring, tile work, showers, backsplashes, and cabinet installation, and learned more by using what he jokingly calls YouTube University.

At the same time, he understood his limits. Electrical, plumbing, and drywall were often better left to specialists. That judgment matters. Being scrappy is useful. Pretending to be an expert in everything is expensive.

Those years in residential taught him how to solve problems, manage projects, and stay resourceful. But they also taught him what kind of business he did not want forever.

Why small multifamily was not the endgame

Jonathan thought small multifamily might become his long-term empire. Instead, it showed him how management-heavy that asset class can be.

That realization is what pushed him to look for a better fit. He wanted investments that could produce income without demanding constant operational attention. He also wanted the ability to invest outside his local market, because he lives in Steamboat Springs, Colorado, where pricing does not currently make sense for his strategy.

So over time, he started selling off the small multifamily portfolio and transitioning into single-tenant industrial properties, generally under 20,000 square feet and leased to long-term tenants on triple net leases.

Could he have skipped straight to industrial?

Jonathan’s answer is basically no.

In hindsight, everyone likes the idea of having bought industrial years earlier. But practically speaking, he believes the earlier experiences were necessary. They shaped his skills, his risk tolerance, and his understanding of what kind of life he wanted real estate to support.

There is also a visibility problem. Residential investing gets enormous attention. Small multifamily is everywhere in podcasts, books, and social media. Industrial is not. Very few people are talking about buying smaller warehouses and service-oriented flex buildings, especially compared to apartments or large multifamily syndications.

That means it is harder to stumble into industrial without first developing a broader commercial lens.

What makes industrial different from residential

The fundamentals of real estate still apply across asset classes. Buy quality property in a good location, understand supply and demand, create value, and sell well. But the mechanism of value creation is very different in industrial.

In residential, value-add often means physical improvements:

  • Remodeling kitchens
  • Updating bathrooms
  • Installing flooring
  • Improving finishes

In industrial, some physical improvements may matter, but the biggest value creation often happens on paper.

That means:

  • Securing a stronger tenant
  • Extending lease term
  • Raising rents toward market
  • Improving lease structure

A building with a quality tenant on a five-, seven-, or ten-year lease is dramatically more valuable than a similar building with an average tenant on a one-year or month-to-month arrangement.

That shift in thinking is a major jump for investors coming from residential. The upside can be much larger, but so can the consequences of misunderstanding market rent, tenant quality, or re-leasing risk.

Why equivalent industrial deals can produce outsized returns

Jonathan describes the profit potential in industrial as a step change. On a solid residential deal, making $30,000 might be a good result. On an industrial deal with the right lease and tenant repositioning, an equivalent value-add effort might create $300,000.

That does not mean industrial is easy money. It means the economics are more sensitive to lease quality and rent levels.

To execute well, an investor needs to answer questions like:

  • What is true market rent for this building?
  • How likely is the tenant to renew?
  • If the tenant leaves, how long will re-leasing take?
  • How much demand exists for this exact product type?
  • What features make the property desirable or hard to lease?

Those are not casual questions. They usually require broker insight, market reps, and a lot of conversations with people who know the local industrial landscape.

Why industrial over retail or office

Jonathan is careful not to claim industrial is universally better than every other asset class. Money can be made in retail, office, multifamily, and industrial. His point is that investors need to choose a lane and learn it deeply.

For him, industrial won for two main reasons.

1. Lower management burden

He wanted a format that was compatible with distance investing and self-management. Triple net leases gave him exactly that.

In a typical net lease structure, the tenant handles:

  • Property taxes
  • Insurance
  • Routine maintenance
  • Light bulbs
  • Snow removal
  • Lawn care
  • Day-to-day operational upkeep

In many cases, Jonathan’s landlord responsibilities are limited to:

  • Roof
  • Structure
  • Sometimes HVAC, depending on the lease

He even owns one absolute net lease where the tenant is responsible for everything, including roof, structure, and parking lot.

2. Less tenant improvement risk

Retail and office can require significant buildout dollars to attract or retain tenants. A new office tenant may want a redesigned layout, upgraded ceilings, kitchen buildout, or specialized finishes. Retail tenants can have similar demands.

That capital exposure was a major turnoff.

Industrial tenants, especially the service-based businesses Jonathan targets, are usually much more functional in their needs. They are not looking for a showpiece. They want usable space with basics that support operations:

  • Heat
  • Sometimes air conditioning
  • Roll-up doors
  • Warehouse area
  • Yard space

That simplicity makes industrial especially appealing for investors who want fewer moving parts.

What kind of industrial properties he buys

Jonathan is not buying giant logistics facilities or freeway-adjacent Amazon-style warehouses. His niche is much smaller and more targeted.

His general buy box includes:

  • Purchase price: under $2 million
  • Building size: under 20,000 square feet
  • Occupancy: already occupied
  • Tenant history: ideally established in the space for a decade or more
  • Value-add angle: lease nearing expiration and rent below market
  • Initial return target: generally buying around an 8 to 9 cap on day one

The typical setup is a flex-style building with a small office component, a bathroom, and mostly warehouse plus yard space.

What he looks for physically in the building

Because these are operational properties for service businesses, the physical layout matters a lot.

Office should stay under 20%

Jonathan prefers office space to remain under 20 percent of total square footage. Once office becomes too large a share of the building, the property becomes less attractive to the warehouse-focused tenants he wants.

Most of these businesses can make do with less office space. They can put desks closer together. What they cannot easily replace is warehouse utility.

Door height matters

He likes doors to be at least 12 feet high, and 14 feet is even better. At that size, a semi-trailer can generally access the space.

Ceiling height is useful, but context matters

Clear height is a huge issue for distribution centers, where large tenants want to stack product as high as possible. That is not usually the case here.

For older service-oriented industrial buildings, ceiling heights around 14 to 16 feet are typically sufficient. These tenants need to move materials, use forklifts, and operate efficiently, not build forty-foot vertical storage systems.

Yard space is a major advantage

Yard space is one of the most important features in this niche. Many tenants want room for:

  • Truck turning
  • Truck parking
  • Trailer storage
  • Material storage
  • Employee vehicles

Buildings that are too tightly boxed in can be harder to lease because many service businesses need outdoor operational flexibility.

Who the tenants are

This is one of the biggest mental hurdles with industrial. Residential is intuitive because everyone understands who lives in a house or apartment. Retail is more visible because people pass storefronts every day.

Industrial is different. The tenant pool is less obvious unless you spend time in the space.

Jonathan focuses largely on service-based blue-collar businesses. These are companies that need warehouse and yard functionality more than polished interiors. They are often practical operators who value control, utility, and stability. If they find a good location that works for their business, they often want to stay because suitable alternatives are limited.

Where he invests and how he chooses markets

Jonathan owns all of his properties out of state, including assets in:

  • Cheyenne, Wyoming
  • Iowa
  • Oklahoma City

He is open to about 40 states nationwide and avoids only a small group for various reasons.

That broad geographic flexibility is only possible because the management burden is so low. He is not trying to manage dozens of apartment turns from afar. He is dealing with single-tenant net-leased assets where the tenant handles daily operations.

When evaluating markets, he looks for:

  • Population over 100,000
  • Population growth
  • A diverse workforce
  • A supply and demand imbalance for this specific type of small industrial product

One of the biggest tailwinds in the niche is that very few developers are building this exact product. New development tends to favor other formats, including more flexible multi-tenant designs. Meanwhile, many businesses still prefer having their own standalone building with a yard and fence line.

That mismatch supports occupancy and renewal behavior.

Jonathan also talks with local brokers to understand vacancy rates for the product type. If vacancy is below 5 percent, he feels much better about the odds of re-leasing quickly if a tenant ever leaves.

How he finds deals

These properties are not easy to find.

Jonathan uses a mix of:

  • Broker relationships
  • Direct mail
  • Krexy
  • LoopNet
  • Frequent follow-up on stale listings

He looks for listings that have been sitting for a while, then calls to see whether the opportunity is still alive and whether the seller may be more flexible than the list price suggests.

One useful observation from his recent experience is that sellers in this niche are becoming more willing to discount. In some cases, asking prices are aspirational rather than realistic. That creates room for disciplined low offers, especially when a listing has lingered.

How the deals are financed

Jonathan mostly finances deals himself, often using sale proceeds from multifamily dispositions. He also works with private money from friends and family on a debt basis, usually for 12 to 18 months.

That gives him flexibility to close in cash when needed, which can be a major advantage against financed buyers. After closing, he can refinance with bank debt and recycle the private capital into the next opportunity.

On the bank side, these deals are typically financed through local community banks.

And this is where one of his strongest beliefs comes through clearly: relationships rule real estate.

A lender’s appetite for a property matters, but their confidence in the borrower matters too. Jonathan emphasizes that his financing success comes partly from track record and partly from having built relationships over multiple deals. That trust allows him to approach a banker with a property and a plan, then get a quick read on whether the bank is interested.

Long-term leases certainly help. A five-year lease is good. A ten-year lease is better. But relationships can also support financing in trickier situations, including vacant properties or properties with lease expiration risk, if the lender believes in the operator.

The lease strategy that creates value

Jonathan’s ideal value-add setup is straightforward:

  • Buy a building occupied by a long-term tenant
  • Target leases that are expiring soon
  • Identify rents that are below current market
  • Extend the lease
  • Raise rents toward market

That combination can dramatically improve the property’s value.

For annual rent bumps, he says 3 percent is standard when a lease is already at market. If the current rent is below market, he may negotiate more than 3 percent in order to move the tenant back toward market over time.

How he underwrites tenants without full financial statements

This is where industrial underwriting gets especially interesting.

Most of these tenants are private companies, and in many leases they have no obligation to provide financials. So while a buyer may want detailed statements, there is often no contractual right to demand them.

Jonathan’s workaround is practical. In his letter of intent and purchase contract, he typically includes the right to speak with the tenant during due diligence. Usually there is no pushback.

That conversation can reveal a lot.

Questions he may ask include:

  • How many employees work out of this location?
  • What percentage of the company’s revenue comes from this location?
  • How many clients are served here?
  • Are there any major contracts in place right now?
  • How is this year shaping up?
  • How did last year compare to prior years?

Those answers help build a picture of scale, stability, and operational importance.

And sometimes, once rapport is established, the tenant will voluntarily share some level of financial information. It may not be a full underwriting package, but even a year-end summary or profit and loss statement can provide useful top-line and bottom-line context.

The due diligence step residential investors often overlook

One major difference between residential and industrial due diligence is the Phase 1 environmental study.

This is non-negotiable in Jonathan’s world.

An environmental consultant reviews the building, studies historical records, and looks for red flags tied to prior or current operations. The reason is simple: when you buy the building, you may also be buying liability.

If there was a prior chemical spill, oil issue, or contamination event, the property owner can be on the hook. A Phase 1 study helps identify those risks before closing rather than after a problem becomes yours.

Why triple net leases make out-of-state investing actually passive

A lot of real estate gets described as passive when it really means outsourced. Jonathan’s model is different.

Because the assets are single-tenant and leased on net terms, he manages properties across multiple states without using a third-party property manager. He communicates directly with tenants, while the tenants themselves handle taxes, insurance, and routine property responsibilities.

That structure is what makes distance investing realistic for him.

It is not that the properties require no attention. It is that they are designed to avoid the constant management friction that comes with smaller residential assets.

Why the current market may be creating a buying window

Jonathan is particularly excited about today’s opportunity set because of how commercial debt works.

Many commercial loans were originated in three, five, seven, or ten-year terms. That means loans put in place five to seven years ago are now maturing into a very different interest rate environment.

Owners facing maturity may now have to choose between:

  • Accepting lower cash flow after refinancing
  • Bringing fresh capital into a cash-in refinance
  • Selling the property

For owners who do not want to inject new equity or accept a worse payment structure, selling may become the most practical answer.

That pressure can create better buying conditions for investors who know exactly what they want and can move decisively.

Sale leasebacks as a deal source

Jonathan is also working on sale-leasebacks, which can be an excellent source of industrial opportunities when done carefully.

In the right situation, a business owner sells the real estate, stays in place as the tenant, and uses the sale proceeds to grow operations, hire people, or redeploy capital into the business.

But there are real traps here.

One of the biggest is above-market rent. A mom-and-pop owner-user might offer to pay a rent well above true market because it boosts the valuation and sale price. That can look attractive on paper, but it can also be a warning sign. If the rent is not sustainable, the seller may collect a big payday at closing and then struggle to keep paying.

That is why sale leasebacks require confidence in both:

  • The tenant’s long-term viability
  • The rent’s alignment with actual market conditions

If it is a short-term sale-leaseback, Jonathan wants to buy at a very strong basis. If it is long-term with a solid operator, it can be a compelling setup.

The bigger lesson for investors

Jonathan’s path is a useful reminder that real estate strategy evolves.

He did not begin by chasing the perfect niche. He began by solving the problem in front of him, which was how to create freedom from a modest salary. Flipping funded the first moves. Small multifamily taught him operations. Commercial brought new lessons. And industrial ultimately aligned best with the life he wanted to build.

For investors who feel boxed into residential because it is the most familiar path, small industrial deserves a closer look. Not because it is easy, and not because it is magically better than everything else, but because it offers a rare combination of:

  • Low management intensity
  • Strong lease-driven value creation
  • Distance-friendly ownership
  • A tenant base with real incentive to stay put

That is a powerful setup when bought correctly.

Final thoughts

The most interesting part of this strategy is that it sits in a gap. It is too commercial for many residential investors and too small or too unglamorous for groups chasing institutional industrial. That gap is often where opportunity lives.

For anyone wondering what comes after small multifamily, or what truly passive out-of-state investing can look like when the lease structure does the heavy lifting, Jonathan’s approach offers a compelling answer.

Key themes worth remembering:

  • In industrial, value is often created through leases more than renovations.
  • Triple net structures can remove much of the day-to-day management burden.
  • Small industrial buildings with yard space are often in persistent demand.
  • Tenant conversations can reveal more than a spreadsheet when financials are unavailable.
  • Phase 1 environmental diligence is essential.
  • Maturing commercial debt may create attractive acquisition opportunities right now.