If you have decided to purchase a Triple net property for sale, it is important to consider ways to finance your investment. There are many different options and routes you can take to do this. However, it is best to carefully evaluate which one is right for your particular investment abilities.
Triple Net Properties Explained
Triple net (NNN) properties are a low-risk, high-reward investment that places the bulk of the financial burden on the tenant. This is why part of the key to a successful NNN investment is to choose the right tenant. Typically, chain businesses are more reliable. This is in comparison to smaller, independent businesses. The former presents a lower risk than the latter.
Just about anyone can invest in a triple net property. Occasionally, a specific net worth is required for investing on your own. There are investment firms where you can be part of a group investment. For those who have not invested in commercial property before, this is a great way to get your feet wet while learning how to navigate the market.
Another major draw for investors is the long-term lease requirements. You have the option to purchase a triple net property right as the tenant is renewing a ten-year lease. Most of the time, you are secure in your investment for at least ten years. One exception will be if the property you purchase is leased by an independent company rather than a chain.
5 Steps to Financing Your Triple Net Property for Sale
#1: Hire a Triple Net Advisor
Hiring a professional triple net advisor is one of the best steps you can take to making your first commercial investment. Is this is your first commercial real estate venture? If so, then an advisor will be able to help you navigate the ins and outs of choosing and purchasing your property.
#2: Choosing a Property
There are many factors to consider when you look for a triple net property for sale. For instance, location is one of the most important things you will want to look at. A property in an easily accessible location will attract more customers and lead to a steady revenue stream.
If the property is located near a shopping center, traffic will always flow around and through it. Free-standing, single-business properties are the best option.
This is especially the case for those who are just beginning their commercial real estate investment journey. These properties are easier to manage because they only have a single tenant.
#3: Save for a Down Payment
If you choose to finance your investment venture through a lending company, there is a high likelihood that you will need a 30-40% down payment for the property. And, this isn’t a down payment you can ‘scrape’ together, leaving nothing in your bank account.
Lenders typically require that you maintain a certain degree of liquidity even after making the down payment. Before approving you for a loan, they will run checks on your credit score, income, tenant financial, and other factors.
If you have hired a triple net lease advisor, they will help you choose a property that is ideal for your financial abilities. This means that you will be in a better position to be approved for a loan, even after a down payment is made.
#4: Apply for a Loan from a Reputable Lender
When you begin to think about applying for a loan, it is important to gather all of the paperwork and materials needed for the lender to evaluate your eligibility. These will include things like the lease agreement, terms, and tenant financials.
Primarily, your lender will want to see that the tenant is stable and has a consistent, reliable income. The lender will pay particular attention to any debts or mishandling of revenue that shows up in the tenant’s records.
It is to your benefit to choose a tenant invested in staying for the full lease term, although it is very rare for a tenant to get out of the lease. Additionally, it is important for you to realize that few lenders will give you a loan that extends beyond the lease term.
For instance, if you have a ten-year lease with Dollar General, your loan will not extend beyond ten years. In fact, most lenders will make it an eight-year loan. When you choose your lending firm, ask questions. Also, be sure to clarify the terms of your loan agreement so that you don’t meet with surprises in the future.
#5: Enjoy Your Low-Risk Investment
When you purchase your first commercial real estate property, learning how to navigate the market will seem overwhelming. Net Lease World is available to help answer your questions, locate a property, and guide you through the entire process. Once you’ve successfully purchased the property, enjoy the benefits of being the owner of a NNN property.