Application of Critical Accounting Policies

The Company'sCompany’s financial statements have been prepared in accordance with US GAAP. Preparing the financial statements requires management to use judgment in the application of these accounting policies, including making estimates and assumptions. These judgments will affect the reported amounts of the Company'sCompany’s assets and liabilities and the disclosure of contingent assets and liabilities as of the dates of the financial statements and will affect the reported amounts of revenue and expenses during the reporting periods. It is possible that the carrying amount of the Company'sCompany’s assets and liabilities, or the results of reported operations, will be affected if management'smanagement’s estimates or assumptions prove inaccurate.

Management of the Company evaluates the following accounting estimates on an ongoing basis, and has discussed the development and selection of these estimates and the management discussion and analysis disclosures regarding them with the managing member of the Company.

Upon acquisition of real properties, the Company records them in the financial statements at cost. The purchase price is allocated to tangible assets, consisting of land and building, and to identified intangible assets and liabilities, which may include the value of above market and below market leases and the value of in-place leases. The allocation of the purchase price is based upon the fair value of each component of the property. Although independent appraisals may be used to assist in the determination of fair value, in many cases these values will be based upon management'smanagement’s assessment of each property, the selling prices of comparable properties and the discounted value of cash flows from the asset.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)

The fair values of above market and below market in-place leases will be recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) an estimate of fair market lease rates for the corresponding in-place leases measured over a period equal to the non-cancelable term of the lease including any bargain renewal periods. The above market and below market lease values will be capitalized as intangible lease assets or liabilities. Above market lease values will be amortized as an adjustment of rental income over the remaining term of the respective leases. Below market lease values will be amortized as an adjustment of rental income over the remaining term of the respective leases, including any bargain renewal periods. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of above market and below market in-place lease values relating to that lease would be recorded as an adjustment to rental income.

The fair values of in-place leases will include estimated direct costs associated with obtaining a new tenant, and opportunity costs associated with lost rentals which are avoided by acquiring an in-place lease. Direct costs associated with obtaining a new tenant may include commissions, tenant improvements, and other direct costs and are estimated, in part, by management'smanagement’s consideration of current market costs to execute a similar lease. These direct costs will be included in intangible lease assets on the balance sheet and will be amortized to expense over the remaining term of the respective leases. The value of opportunity costs will be calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. These intangibles will be included in intangible lease assets on the balance sheet and will be amortized to expense over the remaining term of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of in-place lease assets relating to that lease would be expensed.

The determination of the fair values of the assets and liabilities acquired will require the use of significant assumptions with regard to the current market rental rates, rental growth rates, discount and capitalization rates, interest rates and other variables. If management'smanagement’s estimates or assumptions prove inaccurate, the result would be an inaccurate allocation of purchase price, which could impact the amount of reported net income.

Properties are carried at original cost, less accumulated depreciation and amortization. The Company tests long-lived assets for recoverability when events or changes in circumstances indicate that the carrying value may not be recoverable. For properties the Company will hold and operate, management determines whether impairment has occurred by comparing the property'sproperty’s probability-weighted future undiscounted cash flows to its current carrying value. For properties held for sale, management determines whether impairment has occurred by comparing the property'sproperty’s estimated fair value less cost to sell to its current carrying value. If the carrying value is greater than the net realizable value, an impairment loss is recorded to reduce the carrying value of the property to its net realizable value. Changes in these assumptions or analysis may cause material changes in the carrying value of the properties.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)

AEI Fund Management, Inc. allocates expenses to each of the funds they manage primarily on the basis of the number of hours devoted by their employees to each fund'sfund’s affairs. They also allocate expenses at the end of each month that are not directly related to a fund'sfund’s operations based upon the number of investors in the fund and the fund'sfund’s capitalization relative to other funds they manage. The Company reimburses these expenses subject to detailed limitations contained in the Operating Agreement.

Results of Operations

For the nine months ended September 30, 20172020 and 2016,2019, the Company recognized rental income of $711,183$497,193 and $807,033,$553,083, respectively. In 2017,2020, rental income decreased due to leasing athe sale of one property to a new tenant at a lower annual rentin 2019 and rent that was not received from the tenant oflease terms ending for the Sports AuthorityAdvance Auto store, as discussed below. These decreases were partially offset by additional rent received from one property acquisition in 20162019 and rent increases on two properties. Based on the scheduled rent for the properties owned as of October 31, 2017,2020, the Company expects to recognize rental income of approximately $944,000$663,000 and $941,000$665,000 in 20172020 and 2018,2021, respectively.

For the nine months ended September 30, 20172020 and 2016,2019, the Company incurred LLC administration expenses from affiliated parties of $109,788$81,936 and $115,853,$111,038, respectively. These administration expenses include costs associated with the management of the properties, processing distributions, reporting requirements and communicating with the Limited Members. During the same periods, the Company incurred LLC administration and property management expenses from unrelated parties of $81,287$78,932 and $80,813,$105,854, respectively. These expenses represent direct payments to third parties for legal and filing fees, direct administrative costs, outside audit costs, taxes, insurance and other property costs.

The Company owns a 40% interest in thea former Sports Authority store in Wichita, Kansas. On March 2, 2016, the tenant, TSA Stores, Inc., and its parent company, The Sports Authority, Inc., the guarantor of the lease, filed for Chapter 11 bankruptcy reorganization. In June 2016, the tenant filed a motion with the bankruptcy court to reject the lease for this store effective June 30, 2016, at which time the tenant returned possession of the property to the owners. As of SeptemberJune 30, 2017,2020, the tenant owed $19,366 of past due rent, which was not accrued for financial reporting purposes. The owners listed the property for lease with a real estate broker in the Wichita area. While the property iswas vacant, the Company iswas responsible for its 40% share of real estate taxes and other costs associated with maintaining the property.  The annual rent from this property represented approximately 19% of the total annual rent of the Company's property portfolio.  The loss of rent and increased expenses related to this property decreased the Company's cash flow.  Consequently, beginning with the third quarter of 2016, the Company reduced its regular quarterly cash distribution rate from $0.1313 per Unit to $0.0946 per Unit.

On September 21, 2017, the Company entered into a lease agreement with a primary term of 10 years with Biomat USA, Inc. ("Biomat"(“Biomat”) as a replacement tenant for 28% of the square footage of the property. The tenant will operateoperates a Biomat USA Plasma Center in the space. Biomat may terminate the lease within 90 days if it is unable to obtain governmental approvals and building permits.  The Company'sCompany’s 40% share of annual rent, is $37,071 and is expected to commencewhich commenced on June 18, 2018.2018, is $37,071. Biomat has agreed to pay for the costs to divide the building into two separate spaces, the costs of tenant improvements to remodel the Biomat space and 28% of the cost to replace the roof.

On August 27, 2019, the Company entered into a lease agreement with a primary term of 10 years with BigTime Fun Center, LLC as a replacement tenant for 57% of the square footage of the property. The tenant will operate an indoor sports entertainment center in the space. The Company’s 40% share of annual rent, which commenced on February 23, 2020, is $78,000. As part of the agreement, the Company will pay a tenant improvement allowance of $64,000 when certain conditions are met by the tenant. During the first quarter of 2020, the Company agreed to extend the rent commencement date to June 1, 2020. As part of the agreement, the tenant agreed to convert the tenant improvement allowance to a ten month rent abatement. Due to ongoing difficulties due to the COVID-19 Pandemic the Company is negotiating a rent commencement date of April 1, 2021. As a part of the negotiations the tenant improvement allowance will be responsiblereplaced with a ten month rent abatement starting April 1, 2021. Additionally, this agreement would forebear rent and additional charges for payingthe period from February 23, 2020 to March 31, 2021. In September 2019, the Company paid $32,760 to a real estate broker for its 40% share of the remaining cost to replace the roof, which is expected to be approximately $113,000.  Aslease commission due as part of the lease transaction, the Companytransaction. This amount was capitalized and will pay its 40% share of lease commissions to real estate brokers totaling $54,294 that will be capitalized and amortized over the term of the lease.

The Company owned a 27% interest in a Dick’s Sporting Goods store in Fredericksburg, Virginia. The remaining interests in the property were owned by three affiliates of the Company. On January 31, 2019, the lease term ended, and the tenant returned possession of the property to the owners. While the property was vacant, the Company was responsible for its 27% share of real estate taxes and other costs associated with maintaining the property. The owners listed the property for lease with a real estate broker in the Fredericksburg area. The annual rent from this property represented approximately 24% of the total annual rent of the Company’s property portfolio. The loss of rent and increased expenses related to this property decreased the Company’s cash flow. Consequently, beginning with the first quarter of 2019, the Company reduced its regular quarterly cash distribution rate from $0.0949 per Unit to $0.0527 per Unit.

The Company owns a 55% interest in an Advance Auto Parts store in Middletown, Ohio. The remaining interest in the property is continuingowned by an affiliate of the Company. On July 31, 2019, the lease term ended, and the tenant returned possession of the property to pursue additional tenantsthe owners. While the property is vacant, the Company is responsible for its 55% share of real estate taxes and other costs associated with maintaining the remaining space.property. The owners have listed the property for sale or lease with a real estate broker in the Middletown area. The annual rent from this property represented approximately 11% of the total annual rent of the Company’s property portfolio. The loss of rent and increased expenses related to this property will decrease the Company’s cash flow. However, at this time, the Company does not anticipate the need to further reduce its regular quarterly cash distribution rate.

For the nine months ended September 30, 20172020 and 2016,2019, the Company recognized interest income of $1,199$3,105 and $1,809,$8,703, respectively.

Management believes inflation has not significantly affected income from operations. Leases may contain rent increases, based on the increase in the Consumer Price Index over a specified period, which will result in an increase in rental income over the term of the leases. Inflation also may cause the real estate to appreciate in value. However, inflation and changing prices may have an adverse impact on the operating margins of the properties' tenants, which could impair their ability to pay rent and subsequently reduce the Net Cash Flow available for distributions.

Liquidity and Capital Resources

During the nine months ended September 30, 2017,2020, the Company's cash balances decreased $21,394increased $8,021 as a result of cash generated from operating activities in excess of distributions paid forto the Members. During the nine months ended September 30, 2019, the Company's cash balances increased $211,190 as a tenant improvement allowance, which was partially offset byresult of cash generated from the sale of property and cash generated from operating activities in excess of distributions paid to the Members, and cash used to repurchase Units.  During the nine months ended September 30, 2016, the Company's cash balances decreased $1,674,419 as a result ofwhich were partially offset by cash used to purchase property, and distributions paid to the Members and cash used to repurchase Units in excess of cash generated from operating activities.property.

Net cash provided by operating activities decreased from $643,939$370,454 in 20162019 to $555,954$291,319 in 20172020 as a result of a decrease in total rental and interest income in 2017,2020 and a decrease in net timing differences in the collection of payments from the tenants and the payment of expenses, which were partially offset by a decrease in LLC administration and property management expenses in 2017.  During 2016, cash from operations was reduced by $55,479 of acquisition expenses related to the purchase of real estate.  Pursuant to accounting guidance, these expenses were reflected as operating cash outflows.  However, pursuant to the Company's Operating Agreement, acquisition expenses were funded with proceeds from property sales.2020.

The major components of the Company's cash flow from investing activities are investments in real estate and proceeds from the sale of real estate. During the nine months ended September 30, 2017 and 2016,2019, the PartnershipCompany generated cash flow from the sale of real estate of $1,242,457. During the same period, the Company expended $30,000 and $1,535,714, respectively,$1,042,610 to invest in real properties as the PartnershipCompany reinvested cash generated from property sales completed in 2015.sales.

On February 3, 2016,In December 2018, the Company purchased a Dollar Tree storedecided to sell the Applebee’s restaurant in West Point, Mississippi for $1,535,714.  The property is leased to Dollar Tree Stores, Inc. under a lease agreement with a remaining primary term of 9.7 years (as of the date of purchase) and annual rent of $107,500.

On June 6, 2019, the Company purchased an additional 16% joint-venture interest in the Best Buy store in Eau Claire, Wisconsin for $1,009,850 from AEI Income & Growth Fund 23 LLC (“Fund 23”), an affiliate of the Company. The purchase price of the property interest was based upon the property’s fair market value as determined by an independent, third-party, commercial property appraiser. The property interest became available because Fund 23 is in the process of liquidating its property portfolio. The Company now owns a 46% interest in the Best Buy property. The Company allocated $69,074 of the purchase price to Acquired Intangible Lease Assets, representing in-place lease agreement with a primary term of six years withintangibles. The Cellular Connection LLC, a cell phone retailerannual rent for the additional 16% interest that was subleasing the property from Starbucks Corporation.  The tenantpurchased is scheduled to pay annual rent of $39,156 during the base lease term.  As part of the lease transaction, the Company paid a tenant improvement allowance of $30,000 that was capitalized and will be depreciated.$83,627.

The Company's primary use of cash flow, other than investment in real estate, is distribution payments to Members and cash used to repurchase Units. The Company declares its regular quarterly distributions before the end of each quarter and pays the distribution in the first week after the end of each quarter. The Company attempts to maintain a stable distribution rate from quarter to quarter. The Company may repurchase tendered Units on April 1st and October 1st of each year subject to limitations.

For the nine months ended September 30, 20172020 and 2016,2019, the Company declared distributions of $509,894 and $639,767, respectively.$283,297 for both periods. Pursuant to the Operating Agreement, distributions of Net Cash Flow were allocated 97% to the Limited Members and 3% to the Managing Members. Distributions of Net Proceeds of Sale were allocated 99% to the Limited Members and 1% to the Managing Members. The Limited Members received distributions of $495,001 and $622,999$274,798 and the Managing Members received distributions of $14,893 and $16,768$8,499 for the periods, respectively.both periods.

The Company may repurchase Units from Limited Members who have tendered their Units to the Company. Such Units may be acquired at a discount. The Company will not be obligated to purchase in any year more than 2% of the total number of Units outstanding on January 1 of such year. In no event shall the Company be obligated to purchase Units if, in the sole discretion of the Managing Member, such purchase would impair the capital or operation of the Company.

The continuing rent payments from the properties, together with cash generated from property sales, should be adequate to fund continuing distributions and meet other Company obligations on both a short-term and long-term basis.

Off-Balance Sheet Arrangements

As of September 30, 20172020 and December 31, 2016,2019, the Company had no material off-balance sheet arrangements that had or are reasonably likely to have current or future effects on its financial condition, results of operations, liquidity or capital resources.

Not required for a smaller reporting company.

ITEM 4. CONTROLS AND PROCEDURES.

(a)  Disclosure Controls and Procedures.

Under the supervision and with the participation of management, including its President and Chief Financial Officer, the Managing Member of the Company evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"“Exchange Act”)). Based upon that evaluation, the President and Chief Financial Officer of the Managing Member concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and that such information is accumulated and communicated to management, including the President and Chief Financial Officer of the Managing Member, in a manner that allows timely decisions regarding required disclosure.

(b)  Changes in Internal Control Over Financial Reporting.

During the most recent period covered by this report, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

There are no material pending legal proceedings to which the Company is a party or of which the Company's property is subject.

ITEM 1A. RISK FACTORS.

Not required for a smaller reporting company.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES & USE OF PROCEEDS.

(a) None.

(b) Not applicable.

(c) Pursuant to Section 7.7 of the Operating Agreement, each Limited Member has the right to present Units to the Company for purchase by submitting notice to the Managing Member during January or July of each year. The purchase price of the Units is equal to 85% of the net asset value per Unit, as of the first business day of January or July of each year, as determined by the Managing Member in accordance with the provisions of the Operating Agreement. The purchase price is equal to 100% of the net asset value per Unit in the case of Units of a deceased investor, who purchased the Units in the initial offering and who is a natural person, including Units held by an investor that is an IRA or other qualified plan for which the deceased person was the primary beneficiary, or Units held by an investor that is a grantor trust for which the deceased person was the grantor.

Units tendered to the Company during January and July may be repurchased on April 1^st and October 1^st, respectively, of each year subject to the following limitations. The Company will not be obligated to purchase in any year more than 2% of the total number of Units outstanding on January 1 of such year. In no event shall the Company be obligated to purchase Units if, in the sole discretion of the Managing Member, such purchase would impair the capital or operation of the Company. During the period covered by this report, the Company did not purchase any Units.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not Applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.