Commercial real estate plays a role in retirement planning that’s hard to replicate with traditional retirement vehicles. Done well, the right CRE portfolio produces predictable monthly income, requires almost no active management, throws off depreciation that shelters the income from current taxation, and steps up in basis at death — meaning your heirs can sell the property the day after they inherit it without paying capital gains on a lifetime of appreciation.
This is the service for clients thinking in those terms. If you’re approaching retirement, already retired, or simply planning a long horizon, this page lays out how we structure real estate engagements specifically for income, simplicity, and estate-planning durability.
Contact us to start the conversation about your retirement portfolio.
The information on this page is general and educational. It is not legal, tax, or investment advice. Always consult your CPA, attorney, and financial advisor before acting on any specific strategy.
Who This Service Is For
- Pre-retirees (5–10 years from retirement) building an income foundation
- Recent retirees converting a working-years portfolio into a passive income portfolio
- Established retirees diversifying out of equities into hard-asset income
- Investors using self-directed IRA (SDIRA) structures to hold real estate inside tax-advantaged accounts
- Families thinking about generational wealth transfer and step-up-in-basis planning
Why Commercial Real Estate for Retirement
Three structural features make CRE attractive in retirement portfolios:
Predictable income
A well-underwritten NNN property with an investment-grade tenant on a 10–20 year lease produces near-bond-like cash flow with a yield that typically beats investment-grade fixed income by 100–250 basis points. The lease specifies the rent, the escalations, and the term — you know what next month’s check looks like.
Low management burden
On a true NNN lease, the tenant is responsible for taxes, insurance, and maintenance. The owner’s job, in practice, is to cash the check and renew the lease at the appropriate time. There are no tenants calling at 2 AM, no leaky roofs to repair, no HVAC capital calls.
Tax characteristics
Real estate produces depreciation deductions even when the property is appreciating, sheltering current income. Held until death, real estate receives a stepped-up basis — meaning heirs inherit the property at current market value, eliminating the embedded capital gain.
Comparable bond and dividend income enjoys none of these tax advantages.
NNN Net-Lease as the Retirement Workhorse
Most retirement-focused real estate portfolios are built around NNN net-lease properties — and within that category, QSR ground leases (Chick-fil-A, McDonald’s, Starbucks, Dollar General, etc.) on long-term leases with investment-grade or near-investment-grade tenants.
The economics are straightforward:
- Tenant pays rent monthly on a long-term lease (commonly 10–20 years with multiple renewal options)
- Tenant pays property taxes, insurance, and maintenance directly
- Rent typically escalates on a defined schedule — flat increases, percentage increases, or CPI-linked
- Owner receives net rent with minimal management
For a retired owner who previously held actively managed property (apartments, strip centers, mom-and-pop retail), transitioning to NNN is often the single largest improvement in quality of life their portfolio can produce.
We commonly help retirement-stage clients execute this transition via 1031 exchange — selling appreciated active properties and rolling the proceeds into NNN replacement assets without triggering capital gains tax in the process.
Self-Directed IRA (SDIRA) Real Estate
Real estate can be held inside an IRA through a self-directed structure. The mechanics:
- You establish a self-directed IRA with a custodian that permits real estate investments (Equity Trust, Entrust, IRAR, and others)
- You roll over or contribute funds into the SDIRA
- The IRA — not you personally — purchases the property
- All rent flows back to the IRA; all expenses are paid from the IRA
- Inside a traditional SDIRA, income and gains grow tax-deferred; inside a Roth SDIRA, tax-free
There are important rules and restrictions, including prohibited transactions (you cannot personally use the property, your immediate family cannot rent it, you cannot do repair work on it), UBIT considerations on leveraged real estate, and required minimum distributions in traditional SDIRA accounts. SDIRA real estate is not appropriate for every investor and requires careful coordination with the custodian and your tax advisor.
What we provide on the brokerage side is property sourcing and transaction execution. The SDIRA structure itself is set up between you, your custodian, and your tax advisor before we get involved on the property side.
Estate Planning and the Step-Up in Basis
For investors holding CRE long-term, the step-up in basis at death is one of the most powerful planning features in U.S. tax law. Under current law, real estate held until death passes to heirs at fair market value as of the date of death — not the original purchase price. Heirs can sell the property the next day without paying capital gains on the accumulated appreciation.
The practical implication: for an investor who acquires NNN property in their late 50s or early 60s and holds it through retirement, the heirs may receive the property at 2–4× the original purchase price with zero capital gains liability. The income produced during the holding period was already received and largely sheltered by depreciation; the appreciation passes to the next generation tax-free.
This calculus changes the optimal strategy versus a working-years portfolio. Selling and exchanging into “better” properties every few years can make sense in your 40s. In your 60s and beyond, holding the right property and letting it pass through your estate is often the better outcome.
Cash Flow vs. Appreciation
Retirement-stage portfolios typically tilt cash-flow-heavy, not appreciation-heavy. The right property for a 35-year-old building wealth is not the right property for a 70-year-old funding retirement.
For retirement portfolios we generally prioritize:
- Higher cap rate (better current yield) over speculative appreciation
- Longer remaining lease term (income predictability) over short-lease properties with renewal upside
- Stronger tenant credit (income durability) over higher-yield distressed credits
- Geographically diversified small portfolios over concentrated bets
- True NNN structure (no landlord responsibilities) over modified-gross or NN structures
Portfolio Structuring
Most retirement clients don’t acquire one property — they build a small portfolio of three to seven properties across different tenants, property types, and geographies. A typical structure:
- 2–3 QSR ground leases with national-credit tenants (predictable base income)
- 1–2 net-lease retail or service properties (yield enhancement)
- 1–2 owner-financed or longer-hold positions (estate planning anchor)
The right mix depends on portfolio size, income needs, tax situation, and family circumstances. We work through the structure in the buy-box conversation before we start sourcing.
Frequently Asked Questions
How much do I need to start a real estate retirement portfolio?
Entry points for single NNN properties typically start around $1M–$1.5M for smaller tenant credits and longer-yield-curve assets. Premium credit tenants on long leases trade at much higher prices. SDIRA structures and DSTs (Delaware Statutory Trusts) allow smaller entry points but come with their own considerations.
What kind of yield should I expect on a retirement NNN portfolio?
Current market cap rates on NNN net-lease investment-grade product in the Southeast generally run in a band roughly 100–300 basis points above the 10-year Treasury, depending on tenant credit and remaining lease term. Yields vary with rate cycles; ask us for current market levels when we talk.
Is CRE riskier than bonds for retirement income?
Different risk profile, not necessarily higher. Bonds carry interest rate risk and inflation risk; real estate carries tenant credit risk, vacancy risk, and illiquidity risk. A diversified small NNN portfolio with strong tenants has historically produced more inflation-resistant income than a comparable bond portfolio, but is meaningfully harder to sell on short notice.
Can I 1031 from my current rental properties into a retirement-focused NNN portfolio?
Yes — and this is one of the most common transitions we help with. See our 1031 exchange page for the timeline and rules.
What happens to my real estate when I die?
Under current U.S. tax law, real estate held at death receives a stepped-up basis to fair market value. Heirs can sell without paying capital gains on the accumulated appreciation. Estate tax may apply for estates exceeding the federal exemption, which varies year to year. Coordinate with your estate planning attorney.
Should I put real estate in my IRA?
It depends. SDIRA real estate has real advantages — tax-deferred or tax-free growth, diversification away from traditional securities — but also constraints including prohibited transactions, UBIT on leveraged property, and RMDs in traditional accounts. For some investors it’s a great fit; for others, holding the property personally and using depreciation against current income is the better structure. This is a conversation to have with your CPA before we start sourcing.
What’s the typical hold period for a retirement property?
For retirement-stage acquisitions, we generally underwrite to a 15+ year hold — often a “hold until death” strategy that maximizes the step-up in basis benefit. Earlier sales are possible but usually defeat the purpose.
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