What is a 1031 exchange in real estate?

A 1031 exchange (named after IRS Section 1031) allows real estate investors to defer capital gains taxes by reinvesting the proceeds from a sold investment property into a 'like-kind' replacement property. Key rules: (1) The replacement property must be identified within 45 days of closing the relinquished property; (2) The exchange must close within 180 days; (3) To defer all capital gains, the replacement property must be equal or greater in value and you must reinvest all net equity; (4) A qualified intermediary (QI) must hold the proceeds — you cannot touch the money. 1031 exchanges work for any investment real estate: residential rentals, commercial buildings, vacant land, NNN leases. Primary residence and fix-and-flips do not qualify. The tax deferral compounds over time — investors use serial 1031 exchanges to build wealth over decades, ultimately stepping up the cost basis at death, eliminating the deferred gain for heirs.

What is a triple net (NNN) lease?

A triple net (NNN) lease is a commercial real estate lease structure where the tenant pays the three 'nets' in addition to base rent: (1) Property taxes — the tenant pays the real estate taxes on the property; (2) Building insurance — the tenant maintains and pays for property insurance; (3) Maintenance/CAM — the tenant is responsible for maintenance, repairs, and common area maintenance. NNN leases are common in retail (fast food, dollar stores, pharmacies, auto parts) and industrial properties. From an investor's perspective, NNN leases are attractive because they provide passive, predictable income with minimal landlord responsibilities — making them ideal for 1031 exchange buyers seeking management-free ownership. Cap rates for investment-grade NNN properties (McDonald's, Dollar General, CVS, AutoZone) typically range from 4.5-6.5%. Lease terms are usually 10-25 years with rent escalations of 5-10% every 5 years or 1-2% annually.

What is a cap rate in commercial real estate?

Cap rate (capitalization rate) is the primary metric for valuing income-producing commercial real estate. Formula: Cap Rate = Net Operating Income (NOI) ÷ Property Value. Example: A property with $100,000 NOI selling for $1,500,000 has a 6.67% cap rate. NOI = Gross rental income minus operating expenses (taxes, insurance, maintenance, management) — before debt service. Cap rates reflect risk: lower cap rates = lower risk, higher prices (Class A multifamily in major markets: 4-5%); higher cap rates = higher risk, lower prices (secondary markets, older buildings: 7-9%). Cap rates move inversely with interest rates — when interest rates rise, cap rates tend to rise (prices fall). For 1031 exchange buyers: the spread between cap rate and borrowing rate (debt yield spread) determines cash-on-cash returns; a 6% cap rate with 7% mortgage rates creates negative leverage. Current (2026) NNN market: investment-grade single-tenant net lease properties trade at 5-6.5% cap rates depending on tenant credit, lease term, and location.

Burger King NNN
lease analysis.

Burger King's NNN market is dominated by franchisee-signed leases — RBI has aggressively refranchised the system. This makes corporate vs. franchisee distinction critical. Corporate Burger King ground leases with parent guarantee trade competitively; franchisee leases are widely-available and trade at meaningfully wider cap rates.

GM By Glen Gomez-Meade~7 min read Published Apr 23, 2026

Read this first

Credit ratings, cap-rate bands, lease structures, and corporate strategy shift constantly. Every figure on this page — credit profile, capitalization rate range, prototype size, lease term — may be stale by the time you read it. The tenant's credit can change between rating-agency reviews; cap rates move with interest rates and market sentiment monthly.

The Upleg makes no representation that any specific number, rating, or lease characteristic is current or correct for any particular Burger King property you are evaluating. Pull current credit reports, verify the actual lease document, and confirm market cap rates with a working CRE broker before you bid. The Upleg, its author, and its parent disclaim all liability for any outcome resulting from reliance on this content.

Quick reference · Burger King

Legal entity: Burger King Corporation (or franchisee entity)
Parent: Restaurant Brands International (RBI) (QSR)
Credit profile: Investment-grade parent (BB+/BBB-). Most Burger King locations are franchisee-operated; corporate leases are a minority.
Typical lease: NNN or ground lease; corporate vs. franchisee distinction is critical.
Typical term: 15–20 years initial with options.
Rent bumps: 10% every 5 years typical.
Prototype size: ~2,800–3,400 SF on 0.75–1.25 acre pad.
Cap rate band: 6.25–7.50% (corporate) / 7.00–8.25% (franchisee) (2026)

About Burger King as a NNN tenant

How Burger King structures its NNN leases

Burger King NNN leases vary significantly. Corporate-signed leases carry Burger King Corp. or RBI parent guarantee. Franchisee leases are signed by the franchisee operating entity with variable parent guarantee language.

Store specs and site profile

Prototype Burger King is 2,800–3,400 SF drive-through configuration on 0.75–1.25 acre pads. Newer prototypes emphasize dual drive-through lanes.

Red flags on a Burger King NNN deal

Franchisee-signed lease without RBI parent guarantee
Multi-unit franchisee operator quality — some Burger King franchisees have faced financial stress
Short remaining primary term
Tertiary market with QSR demand decline
Basis above QSR replacement cost

What to underwrite before buying a Burger King property

CRITICAL: Corporate vs. franchisee lease — verify signing entity
If franchisee: multi-unit operator financial health, parent guarantee language
Remaining primary term
Trade-area QSR competition
Recent comparable BK sales in the market

Frequently asked questions

Are most Burger King NNN leases franchisee-signed?

Yes. RBI has refranchised the majority of U.S. Burger King locations. Most Burger King NNN product for sale is franchisee-signed. Corporate-signed Burger King is less common and trades at materially tighter cap rates.

What cap rate is typical for Burger King NNN?

In 2026, corporate Burger King ground leases in primary markets trade at 6.25–7.00% cap rates. Franchisee-signed Burger King typically trades at 7.00–8.00%+, with the spread reflecting franchisee credit variability.

Using Burger King in a 1031 exchange

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Author

Glen Gomez-Meade

Glen writes The Upleg. More about Glen →

Disclaimer

The Upleg provides general educational information about commercial real estate. Nothing on this site or in any email, guide, or playbook constitutes tax, legal, financial, or investment advice. No attorney-client, broker-client, or fiduciary relationship is created by your use of this site. Reading any content does not retain the author or The Upleg to represent you in any transaction.

Before acting on anything you read here: consult a Qualified Intermediary (QI) for 1031-specific matters, a Certified Public Accountant (CPA) for tax treatment, and a licensed real estate attorney for contract and closing matters. Rules vary by state, and fact-specific outcomes cannot be predicted from general content. The Upleg and its author make no representations or warranties about the accuracy, completeness, or currency of any information presented, and disclaim liability for any outcome resulting from reliance on this content.

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Where the author is a licensed real estate broker and a transaction discussed is one he has represented or is representing, that relationship is disclosed inline.