Triple net lease properties, also known as NNN properties, are a popular turnkey investment for serious investors.
Tenants are high-quality tenants, and properties are well-known franchises such as McDonald’s, AutoZone, Dollar General, Walgreen’s, 7-11, Dunkin Donuts, and many more household names. Of course, triple net properties also include other property types, such as industrial, office properties, or multi-family apartment buildings.
Although triple net properties require an investment of a minimum of $1 million dollars, a safe reliable income, lack of management responsibilities, and long leases make them an ideal choice for investors looking to diversify their portfolio.
Other non-speculative investments like savings accounts or money market funds show returns of about 1%; triple nets on the other hand, offer 5%-6% in returns, making them safe alternatives for investors.
Here’s a helpful list of why investors find triple net properties so attractive:
- Financing a triple net deal is easier than other commercial properties. Investors can turn to both banks and private lenders for funding assistance, and since lenders are more concerned with the stability of the tenant themselves, rather than the credit of the buyer, it’s also easier to get financing. You can also get non-recourse, fixed financing for 10 years.
- No management worries. Triple net properties are managed completely by the tenant. No need to wake up in the middle of the night to deal with an overflowing toilet, rowdy tenants, or a leaky roof; triple net tenants are responsible for all management responsibilities.
- They also pay for any repair and maintenance expenses. The only thing you need do is collect your check from the mail once a month.No vacancies. Lease terms are long-term, and run anywhere from 10 to 25 years. You’ll avoid the hassle of finding a new tenant, renovating the property…only to renovate it again once the tenant’s lease – which could be as little as a year – ends.
- No tenant improvement costs. Tenants pay for any necessary renovations, even large scale ones.
- High residual value. A triple net property holds its value steady over the course of time, making it easy to recoup your investment if you decide to sell.
- Great locations. Net lease properties are almost always in prime areas. Great demographics and high traffic counts are a necessity for high-profile tenants, so you can be assured that even if a tenant chooses not to renew a lease, you’ll be able to easily replace them with a high-quality investment grade tenant.
- Liquid investment. Because triple nets retain their value and tenants are investment-grade tenants, investors can sell properties easily whenever the need arises.
- You can defer capital gains taxes. If you’re thinking of selling an income property, a 1031 tax exchange is an excellent way to defer capital gain taxes. Property structured, a 1031 exchange can save you thousands of dollars in unnecessary taxes.
Triple net properties, like most commercial properties, are mostly found off-market, which means you’ll need a well-connected broker in order to find the best properties.Tags: commercial properties, commercial real estate, NNN, real estate, triple net properties