Safest Triple Net Lease Properties For Wealth Preservation
Investors are looking for more ways to make money work for them. While stocks, crypto, and regular real estate are fine, they need something with less responsibility and a steady income without frequent fluctuations.
Today, we’re going to talk about such a way to preserve your wealth.
A triple net lease is a great way to preserve and increase your wealth since you don’t have to pay certain taxes and additional expenses. The lessee agrees to cover all those costs along with basic rent.
This is the wonder of the NNN lease model.
Everything on the financial side is covered by the other part, including the insurance and maintenance. In a comparison with a regular lease, this is a win-win option for the landlord.
The regular agreement usually makes them responsible for all the ‘technical payments’, maybe except for utilities, depending on the agreement. So, if you want to invest once and make great use of your money, the NNN model is the most suitable. This is also the most common type, so you won’t need to explain it to the tenant before signing an agreement.
In this article, we’ll discover the benefits of the 3x net lease properties for wealth preservation, compare this option to single- and double-net leases, and help you decide whether it’s the option for you!
Triple Net Lease in Detail
This is the most common type of lease if we’re talking about commercial property (and we are).
The key points you need to know about are:
- This is the most responsibility-free option for investors;
- According to such an agreement, the basic rent should be lower, considering all the other expenses the tenant will have to pay for;
- The type is very popular among investors;
- These leases are usually long-term;
- There are more types of property lease, but they are less common.
The total sum of rent is calculated according to the capitalization rate. The rate, in its turn, is determined by the payability and reliability of the tenant.
Many beginners think it’s impossible to find tenants for such an agreement. To help you out, here are the best tenants you can find. Most will likely agree to your terms since the rent is usually lower, considering that there are additional payments.
Keep in mind that such leases are usually long-term (10-25 years or even more). The better the tenant, the longer the lease can continue. Usually, large market, restaurant, and other business chains are using this type of lease.
If you consider a long-term stable asset investment, this is the most stable and resellable yet.
Other Types of Lease
There are two other types, logically. They aren’t as common but worth mentioning. Remember that we’re talking about commercial real estate here. Leasing to store chains, diners, organizations, etc.
Double Net Lease (NN)
A double net lease is also quite common when it comes to commercial property. In this case, the tenant still pays most expenses, but not all. Along with the rent, which should also be lower since there are additional payments, they cover:
- Property taxes;
Yours are the costs of space maintenance. This type of agreement has a heavier load of responsibilities. Besides, you’ll have to pay for the provided services directly. So, the process is more time-consuming.
Single Net Lease (N)
A single net lease isn’t as common as its sisters because the landlord has a lot of responsibility and quite a few additional expenses in this case. The tenant only covers the taxes.
The maintenance, utilities, insurance are all on you. This doesn’t sound like the best investment option. Unless you have reasons why the control should be yours, it’s better to try other options.
The Most Common Benefits of the NNN Lease Model
The benefits are plenty for both parties. However, here, we’ll focus on the advantages of the model for investors a.k.a landlords. Stable income, bank favor, little financial responsibility are just the tip of the iceberg.
Receiving stable income every month will make it easy to compensate for the cost of the place. You’ll pay banks easily (if you borrowed money to get the property) and can invest the rest into other projects. As this real estate pays off, you can buy another one and arrange a similar agreement with another tenant.
You don’t need to forecast how much money you’ll get every month. The estimates are pretty clear. You don’t need an analyst most of the time unless the market has changed dramatically.
Then, you’ll have to recalculate the rent cost and adapt it to the changes to make sure both parties are satisfied.
No Additional Expenses
By achieving the NNN agreement with a reliable tenant, you can be free from:
- Property insurance costs;
- Maintenance costs;
- Some taxes, etc.
This offers you more opportunities for financial growth and preservation of the existing wealth. Your only investment is the property by itself. From then on, it’s all the work of the tenant.
Tenant Is the New Owner
This means you don’t have to worry about renovation, upgrade, or problems with any utility. You act as an investor, receiving income every month.
Property management, including renovations, utility issues, maintenance, are all on the tenant. You give them freedom, they pay the expenses.
Investor Portfolio Diversifying
For every investor, portfolio diversity is quite important. Commercial real estate will help you achieve this goal. Plus, the market is almost always growing, which improves your reputation and portfolio indirectly since your assets grow as well!
Banks love it when investors borrow for the NNN model. It offers stable income, which is great for all parties, including the band lending the money to the interested investor. So, getting financial help is quite easy if you’re going to offer property for rent using a triple net lease.
A triple net lease is a great option both for landlords and tenants. The former don’t have to take a part in the life of the property. Besides, they don’t have many additional costs since the property tax and maintenance costs are all on the tenant.
The latter get lower rent and full freedom in the space. They can renovate it in their brand style and basically do whatever they want design-wise. So, such a lease works for both parties.