NNN properties, also called “triple net lease properties,” refer to single-tenant retail properties.
In a triple net lease, the lessee is responsible for the property’s taxes, insurance, and maintenance payments (on top of rent). This transfers a significant degree of responsibility to the renter and helps the landlord avoid acting as an intermediary for various financial commitments.
We encourage clients to look at some of the available triple net properties on the market.
Although these assets may not be ideal for everyone’s financial objectives, they can be an excellent way to start building a portfolio. These properties are often leased to tenants with exceptional credit scores, allowing landlords to form strong professional relationships with other respectable firms in the area.
The following are some of the ways that NNN properties can benefit both tenants and landlords.
Although each lease agreement is different, the renter is normally responsible for insurance, property taxes, and operational costs. Landlords are usually relieved of administrative work when renters pay fees directly.
In contrast to apartments, which generally have annual leases, most NNN property renters commit to a long-term leasing agreement of 10 to 20 years.
Compared to other asset classes, well-located single-tenant NNN properties with prominent national credit tenants have historically been more resilient.
Investors can choose from a range of national big brand credit tenants who are vital companies and places where people frequently shop, eat and visit when they invest in net leases.
Since the renter is responsible for all property-related expenses, the investor’s net cash flow is safeguarded against fluctuating costs.
Contractual rental hikes are written into most lease agreements, offering an excellent hedge against inflation and wage gains.
You may own property anywhere within the United States with absolute net lease properties and without landlord obligations.
Choose from fully operational tenants in high demand who are not vulnerable to e-commerce trends to reduce your risk.
NNN properties offer many of the advantages of other types of real estate. Since real estate returns are not correlated with bonds and stocks, it can help diversify an investment portfolio.
If you are planning to invest in NNN properties, there are several measures you need to follow.
Here are the most effective strategies we’ve discovered in working with clients that have made triple net investments around the country:
As an investor, you should figure out how much return is best for you and then keep to it. Don’t compromise for a 5% cap rate if you’re seeking a 5.5% rate. If you’ve done your research and know where the market is currently priced, there should be many alternative possibilities in your price range. You should perform your own examination to discover where cap rates are settling before calling an expert to assist you in finding an investment.
After you have a broad concept of what you’re looking for, start talking to triple net leasing advisors to determine who would be the best match for you. A triple net lease consultant is a commercial real estate agent or brokerage with NNN investing experience who can assist you in finding the right property, performing due diligence, and setting you up to succeed.
Triple net leases and renters are not made equal. For instance, some NNN investment prospects may appear to have an excellent cap rate, but as you dive deeper into the property, you discover the existing lease only has three years left. Each tenant also has varying credit ratings based on their financial health, the number of locations, the sort of business or industry they operate in, and other factors. It’s critical that you define your term and tenant parameters upfront so you can focus your search.
Although triple net investments might be appealing as all-cash transactions, it’s a good idea to start talking to lenders as soon as possible to assess where your loan terms will wind up. Knowing those debt conditions in advance will help you with your project underwriting and allow you to move swiftly when you find anything that meets your criteria.
It’s a good idea to keep a file with details on the many sites you’re underwriting once you’ve begun receiving possible investment possibilities. After choosing a property, obtain a letter of intent to buy it from your broker or financial advisor.
Following the acceptance of your proposal, it’s time to investigate the property and the renter further. Because you won’t be physically present, you’ll want to hire a local inspector to check the property and submit a report for your consideration. The existing lease is the next and most crucial thing to look through.
The advantage of investing in NNN properties for sale is that you have few obligations aside from collecting rent and projecting tenant vacancies. Your renter will continue to make monthly payments toward your mortgage, increasing your equity in the property as you retain the profits.
Net Lease World believes that each client’s investing approach should be as distinct as they are. NNN leases are a safe, low-risk approach for property owners to start a long-term investment strategy with a reliable tenant. If you think a triple net lease could be a suitable investment for you, we’d be pleased to discuss your plans.