Diversify Your Portfolio with Net Lease Investments

Jul 25, 2019

Improve Your Portfolio with NNN Investments

Do you want to improve your investment portfolio, increase monthly income, or create an estate plan for your heirs? Maybe you’re a new investor who wants to build wealth while you work, or you like the idea of commercial real estate investments as a career. Whatever the reason, ownership of different net lease properties and diversification within your portfolio is a strategic, stable investment path to accomplish your goals.

risk and reward

Balance Risk & Reward

As with any type of investments, you want to limit volatility and balance risk and reward. In commercial real estate, diversification in the net lease market with different tenant types and asset classes helps mitigate risk with a guard against market instability and offers reliable, passive income with many rewards.

Besides a guaranteed lease from a national corporation that pays you monthly income with periodic increases for 10-20+ years, net lease properties offer less risk because they are always in demand. The ability to buy, sell, and lease rather quickly makes for a more comfortable investment decision. Additionally, the market has remained stable for decades while triple-net tenants continue to evolve with consumer habits.

Owning a mix of property types – NNN, NN, and ground leases – along with your other investment vehicles provides low-risk stability and a cushion against potential ups and downs, as well as the rewards of consistent monthly income, a steady return on investment, immediate and long-range tax advantages, and peace of mind.

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Why Buy More Than One Net Lease Investment?

Just like stocks, bonds, and other investments, it’s best to have a well-rounded selection of assets that perform differently and provide a range of financial tools to meet your short-term and long-term goals. Net lease investments offer predictability not found in many other investments.

NNN Investments

In exchange for completely passive income with no expenses, absolute NNN properties or NNN ground lease investments offer a slightly lower cap rate between 4-7%, yet offer long-term predictability and increasing cash flow for decades. These properties are leased to high credit national corporations such as Walgreens, Dollar General, and McDonald’s. They pay for everything – operating expenses, taxes, maintenance, and capital improvements. As the investor, you are protected from unpredictable, rising operating costs while collecting steady monthly income.

Other Net Lease Investments

NN or modified NNN lease investments present similar advantages with the potential for slightly higher cap rates (6-8%) and monthly rental income to offset landlord obligations like CAM, taxes, management fees, and insurance. Properties such as apartment complexes and retail centers may require a third-party manager with management fees of 3-5% or ongoing capital expenditures for things like the roof and structural repairs. As a landlord, you may not have to be heavily involved in day-to-day management, but there are still responsibilities and expenses to consider when looking at the return on investment.

On average, with net lease investments, you’ll realize 5% to 8% capitalization rates, depending on certain variables, and an internal rate of return (IRR) from 8%-24% over time.

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How to Choose the Best Properties for Your Goals

How do you choose the best net lease investments to maximize your financial potential and balance your overall portfolio? First, define your goals, then look at a range of properties that fit your lifestyle, risk tolerance, and financial ambitions. Keep in mind what you see listed on the open market is only a portion of what’s available. There are developers, builders, and corporations that search for buyers without listing their properties.

Seek a balanced inventory of different tenant types and asset classes across the nation with varying lease durations, terms, and cap rates. This may include fast food, auto parts, dollar stores, retail centers, industrial buildings, banks, gas stations, and/or convenience stores. And, be sure to consider these questions when you search for properties:

  • How much monthly income do you need or want?
  • Does the rent need to service a debt or loan?
  • How involved do you want to be in your investments?
  • Do you need depreciation or appreciation?
  • Do you need tax write-offs?
  • Do you want equity for collateral or financial leverage?
  • Do you own another property that can be used in a 1031 exchange?
“When Westwood Net Lease Advisors told us to diversify, we thought we were dealing with the wrong company. All we wanted to do was buy one property with one check coming in and no aggravation. They encouraged us to go with three smaller properties and that turned out to be great advice. We now get three checks a month and feel safe and secure knowing that we are invested in three totally different retail companies. If one industry goes bad, we can fall back on the other two. They really looked out for us and we appreciate their wonderful approach to investing.” – Dr. Scott Friedman, California

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Strategically Diversify with Net Lease Properties

Whether you are a seasoned investor or you’re new to the net lease market, the most efficient way to find ideal investments and strategically diversify is to partner with a net lease advisor. At Westwood Net Lease Advisors, we assess your risk tolerance and financials, then find and acquire net lease investments that fit your criteria and complement your portfolio.

Our company is unique as we are an elite group of specialists who primarily represent buyers and provide objective advice, education, knowledge, and advocacy – from the property search to closing – at no cost to the buyer. We work hard to help you navigate the often-complex process and use our market connections and industry tools to hone your diversification approach.

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To Wrap It Up – Greater Security & Growth with Diversification

Properly chosen net lease investments are tangible assets that preserve cash flow and yield a reliable income for decades with little to no owner responsibility. An inventory of different tenant types and asset classes offers a strong portfolio of reliable wealth-building assets with security and growth, a strong ROI, and long-term predictability. Diversification is the key to smart investing! Contact us today for your no-obligation consultation. 314-997-5227

Looking To Buy Commercial Property?

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