Are you an investor looking for a high-value property with a steady income and little to no management and maintenance responsibilities? Think Triple Net Lease Properties.
Triple Net Lease Properties, also known as NNN properties or Net Net Net 1031 properties, are low-risk investments with predictable, steady cash flows. In NNN properties, the CAP rates are higher than those of multifamily properties (even in the same area). This means higher leverage for you as well as greater cash flow.
Read on and see the top 10 reasons why Triple Net Lease properties are an excellent investment opportunity.
1. Passive Income
Triple Net Lease properties provide passive income which is generated on your behalf without you having tons of active involvement. Let’s see the difference between passive income and active income.
In active income, you need to be actively involved before you receive the income. This means you first do the work and then you get paid. Moreover, you need to put consistent time and attention into earning active income.
On the other hand, with passive income, you can be in any location in the world doing whatever you want. The income will still be there for you.
2. No Management Responsibility
NNN leases are structured in such a way that the responsibilities and costs of managing the property fall on the tenant. Furthermore, the tenant pays all the ongoing expenses, including:
- Capital expenditures,
- Taxes …
Since the tenants typically choose to rebuild the building to suit their specific needs, renovations and landscaping fall on the tenants as well.
All of the above result in little to no management responsibility for you, the landlord. This means you can use your time for other investments instead of having to put up with midnight phone calls from tenants (or deal with another management firm’s below-par performance).
Additionally, the tenant gets a long-term lease, typically between 5 to 20 years in a high-traffic area. This means investors steer clear of vacancy expenses, and they can avoid the accompanying struggle of finding other tenants.
3. Increased Property Value
When purchasing a commercial Triple Net property, it is wise for investors to note where the present tenant is in the lease duration. If it is toward the end, then you, as the new landlord, will have the responsibility of either negotiating a new lease term with the current tenant or finding a new tenant.
At the same time, an expiring lease gives you a chance to put the property at a higher rate if it is in a strong market area. And that, in turn, will increase the property value as well as the cash flow.
Triple Net Lease properties are usually stable assets that have long-term leases. Furthermore, they are quite visible properties located in main shopping areas with plenty of vehicle and foot traffic. They are often near to large, “anchor type” tenants like Home Depot, Walmart, or Costco.
Regional or national tenants with a large brand-following commonly sign the leases. These tenants have the guaranty and backing of multi-billion dollar companies.
5. Available Financing
Lenders love triple net lease properties for the same reasons you do – they generate a stable income. These leases typically include a tenant that lenders know and understand (well-known companies such as Dollar General, Wal-Mart etc.). And, lenders love the stability of this asset type.
As a result, financing is available for NNN lease properties. Even if you do not get financing when you buy the property, you will still want the peace of mind in knowing that some future buyer can secure financing if you decide to sell the property.
6. High-Quality Tenants
Triple Net Leases often involve high-quality tenants. This offers more security in terms of the stability and financial “deep pockets.” Triple Net Lease properties, for example, can involve companies like 7-11, McDonald’s, AutoZone, and The Dollar Tree.
7. Low Turnover Rate
The low turnover rate helps minimize leasing and marketing expenses. Therefore, banks offer better financing terms like lower down payments and lower mortgage rates. Your personal credit is less of an issue with this low turnover rate. That is due to the fact that banks are often concerned about the financial stability of the tenant.
8. Sale And Leaseback Deals
Another reason to invest in NNN lease properties is that they are the right vehicle for sale or leaseback deals. These deals happen when a company owns a building that they currently occupy, but decide to sell it to raise funds for some other venture or pay off present debt.
9. Lower Price Point To Get Into Industry
Prices for Triple Net Lease Properties can start at a rate as low as $500,000. In addition, the pricing of a large percentage of properties of this asset type is under $5 million. With leverage, an investor with only $200,000 of equity can acquire a Net-Leased property.
Larger properties of this asset type with tenants such as Wal-Mart, Home Depot, and big-box retailers can trade at significantly higher prices. For investors who want to invest in these larger assets but do not have the finances to do so, investment structures like a Delaware Statutory Trust can be a possible option.
10. Relatively Higher Liquidity
Due to all the benefits listed above, Triple Net Lease properties appeal to various commercial real estate investors (ranging from individual investors to larger investment institutions). This means that, if you need to liquidate the property, you may have a large number of potential buyers.
To Wrap It Up
Triple Net Lease or NNN lease properties can work well for both new and experienced investors. They are perfect for those who want to invest in low-risk commercial properties with little to no management and maintenance responsibilities and with steady cash flow. They are a great source of passive income and they can make for perfect 1031 Exchange properties.
If you are interested in investing in NNN lease properties, don’t hesitate to contact us by filling in the online application form. As Buyer’s Agents with over 18 years of experience in the commercial real estate market, Seller’s Agents see our Letter of Intent as an already closed deal.
Let us know what type of investment opportunity you are looking for, and we’ll work to find you the best deal.
If you want to learn more about how Buyer’s Agent can help you make the right commercial property investment, check this article: How Buyer’s Agents Help You Make The Right Commercial Property Investment.