One building, one tenant.
How to think about putting it all behind a single roof and a single signature.
One signature, all the risk
A single-tenant building is the simplest thing to own and the hardest to recover from when it breaks. There is no diversification inside the asset. The tenant pays or it does not. Occupancy is not a percentage that drifts. It is one or zero. That is the whole nature of the deal, and the reason a good single-tenant property is underwritten for the day the tenant leaves, not the day it signs.
Underwrite the empty building
The discipline is to model the vacancy before it happens. Assume the tenant is gone. Now count the cost. How many months until a replacement signs. What you spend to retune the space, the tenant-improvement dollars, the months of free rent it takes to land someone new, the broker fees. Then ask the only question that matters: can you carry the building through that gap. If the stress case is one you can live with, the deal is ownable. If it is not, the cap rate was never the point.
Keep the credit and the real estate as two separate questions. A strong tenant on weak real estate is a good rent check on land you may struggle to re-lease. A weaker tenant on a corner everyone wants is a building that finds a new occupant fast. When the tenant leaves, the credit walks out the door with it. The real estate is what stays, and the real estate is what you fall back on. Buy a corner you would still want when it is empty.
Diversify across deals, not inside one
You cannot diversify a single-tenant building. You can diversify a holding of them. Five single-tenant properties with different tenants, different industries, and lease expirations spread across different years is a materially steadier position than one larger building behind one signature. If a single exchange is large enough to split, splitting it spreads the binary across several rolls instead of one.
How we rank the downside
Shop 1031 underwrites every deal in three cases, and ranks on the hard one. Traditional assumes the tenant renews and the rent keeps climbing on schedule. Bear assumes the tenant leaves, the building sits for about six months, and it re-leases at roughly 90 percent of the old rent. Stress assumes a longer dark period, around eighteen months, and a re-lease near 80 percent. We sort deals by the return that survives the stress case, not the one that shines in the traditional case. A deal that still works when the tenant walks is a deal worth owning.
The most expensive single-tenant deal is the one you bought because the cap rate looked good and the lease ran 25 years, then the tenant filed Chapter 11 in year six.
The point
Single-tenant net lease earns its place in an exchange by being simple, durable, and easy to hold. It keeps that place only if you respect the one risk it concentrates. Buy the building you would still be glad to own the morning the tenant hands back the keys.