What is a NNN Property?
Any investor who buys property abroad is interested in reliable tenants and a long-term relationship with them. In this case, an essential parameter of the object is the type of existing lease agreement, which determines the number of expenses that fall on the tenant’s shoulders.
In contrast to the gross Lease, Net Rental is a preferable option for the investor when the landlord takes care of most operating costs. Let’s focus on this type and its varieties. The Net Lease agreement is most common in the industrial property markets. The purchase of the property, already in the lease, gives an investor many advantages over purchasing a house. These advantages include:
- A long-term relationship. The renter has already chosen in favor of a particular property and intends to use it for many years. The investor receives the property and an established relationship with the renter(s).
- Stable income with minimum worries. The investor knows the level of profitability of the objectives and the amount of regular financial income in advance. In this case, all unforeseen costs, such as repairs or increased tax rates, fall on shoulders.
- Freedom of movement. The owner does not need to be in the same town with the object — the tenant is responsible for its maintenance.
- The ability to attract co-investors. Property, which already has a tenant, can be purchased by several investors.
The term Triple-Net appeared on the warehouse real estate market so long ago. It is widespread in the field of property. The term is the antonym of gross when the owner takes a substantial part of operating costs. Triple-Net pays for everything, while the investor can assess the net profit of the property.
Why Triple-Net Leases are Needed Or Advantages to the Investor
As mentioned above, with a gross lease, some of the OPEX falls on the owner’s shoulders – and it’s not beneficial to him. The Net Rental option implies that it not only pays the contractual rate but is also responsible for maintaining the facility.
The level of the rent is usually lower. But the investor’s goal — not the immediate attraction of profits and a long-term contract. Therefore, an investor who will invest in the project wants to see the financial side of the transaction transparent and clear. It helps him assess the profitability and risks — if the stakes are high, you can abandon the deal.
If the logistics complex is leased under the scheme of three N, the investor’s risks are significantly reduced. After all, even with an increase in taxes and OPEX, the renter will pay them. And therefore, the lion’s share of the risks lies with him.
Triple-Net provides stability and long-term income — this is the main advantage of the property.
Risks: and-so There are
The triple net rate is much better for the owner than for a resident. The owner’s risks include market fluctuations, dependence on the anchor tenant, and liquidity of the location. Thus, a market downturn leads to changes in rates. The renter’s refusal to prolong the contract leads to a long search for another company.
The main advantage of TNL for a company that needs a warehouse is a relatively low rental rate. However, it should be understood that the amount of OPEX may increase, but you still have to pay. In addition, the facility may need expensive repairs, utility bills may go up in a year — and it is difficult to predict such paths of events.
Triple Net Lease as an “Owner’s Market” Indicator
Of course, TNL doesn’t apply only to warehouse real estate. For example, at the beginning of its formation in the office market, costs were automatically included in the rental rate, which gave some marketing advantages (“all-inclusive, no extra costs”). Then VAT was added to the rate, then — utilities, and then it was the turn of full Triple-Net.
This transition is directly related to the availability of upscale facilities and customer demand. If supply significantly exceeds demand, the owner has to compromise. If the situation is quite the opposite, the owner dictates his terms. It is what happened in the real estate rental market.
Experts believe that the market will gradually stabilize thanks to the build-to-suit approach – building-to-suit. In this case, the developers will have to listen to the opinion.
How to Find the Right Option?
Specialists are always ready to advise you on the selection of real estate and choose the actual objects. Need to rent a warehouse of 1000 square meters? Contact the appropriate company, and they will offer you not only premises rented under the Triple Net scheme but also a decent alternative and support in negotiations with the complex owner.
How does real estate investment work, and who earns on it? It seems like something only experienced business people can do. Everyone started somewhere, including the best real estate experts. Why are real estate investments attractive in the first place? The fact that you do not need to know absolutely everything about the market to do it.
You have decided to invest in real estate. Where do you begin? By analyzing key factors.
- competition among landlords. Research rental websites;
- location of the property;
- the object liquidity;
- the cost of utilities, including rates;
- condition of the property from the builder.
How Do I Find Clients to Rent Property?
Renting property makes you learn how to find the right clients quickly and correctly. Today to do this, you need to use several ways at once, which we want to describe. After that, you have to spend time using a proven methodology to see the resulting profits’ stability.
- The First method. Advertising networks. Advertising networks are the easiest and most reliable way to spread the word about your services. Today on the Internet, it is much easier to find necessary clients in any field, so property rental, in this case, will not be an exception. Advertising networks are actively used today by all entrepreneurs.
- The Second method. Social networks and messengers. Someone often says that social networks and messengers are unsuitable for property rental advertising, but it is not valid. The secret is the right choice of topics, which should be one hundred percent consistent with the chosen direction of work.
- The third method. Own website. The lease of property on a large scale will require the creation of its website. Here we are already talking about real estate agencies, where the catalog offers a variety of premises. And it will not take much effort, and then you can use any available methods of advertising campaigns and promotions.
All three methods are pretty effective though they need different budgets to spend and additional resources to engage. Sometimes the work of a coordinated team can prove all three ways of a customer finding efficiently.