As you consider investing in commercial real estate and diving into the net-lease market, there is one main question to ask yourself – how involved do you want to be in managing and maintaining the property?
Do want to take an “active” role, thereby requiring a nearby property and a double-net lease, or would you rather have the tenant take care of everything – including maintenance – and receive passive income from anywhere in the USA with a triple-net lease? Your answer may determine whether a NN lease or NNN lease investment is right for you.
Why Choose a Double-Net Lease Property?
Single-tenant, double-net leases are one type of net-lease property for commercial real estate, though they are not the most ideal investment. With a double net, or NN lease, the tenant pays rent, property taxes, and insurance premiums. All exterior maintenance and associated CapEx, such as HVAC, roofs, windows, and landscaping, remain the responsibility of the building’s owner, who pays for them directly.
While tenants will pay for their pro-rata share of NN expenses, they will not pay for anything above that, so if you own a NN property, you are doing all the work and getting nothing in return. However, if you feel you truly like a “hands-on approach,” there are some national corporations– such as AutoZone, Starbucks, and O’Reilly’s – that only offer NN leases and have the benefit of being credit-worthy, reliable, long-term tenants.
Why Choose a Triple-Net Lease Property?
If you want a passive, long-term investment located anywhere in the country with a reliable, credit-worthy tenant, effortless monthly income with periodic rent increases for 10-20 years, and no maintenance responsibilities – a NNN investment is for you.
A triple-net lease property is an investment in which the tenant agrees to a long-term lease that requires paying the “net” amount for three types of costs – net real estate taxes on the leased asset, net building insurance, and net common area maintenance.
Most often, these tenants are national franchises such as Walgreens, Dollar General, or McDonald’s. They want control of all aspects of the property for uniformity across their brand. They do their own maintenance, use their own vendors, order their own signage, and pay for all CapEx.
Advantages of a NNN Lease Investment
Whether you are new to net-lease real estate or a seasoned investor, a triple-net lease property is a wise consideration with the following advantages:
- Credit-worthy, long-term tenant; usually a national corporation or large QSR franchisee.
- 10-20 years of passive, stable income.
- No maintenance, operations, or management concerns or costs.
- Often a strong corporate-backed lease guarantee.
- If sold, benefit from using the capital in a §1031 tax-deferred exchange.
To Wrap It Up – Know Your Goals Before Buying a NN vs. NNN Investment
As you contemplate your goals and how active you want to be in your net-lease investment, and if you are new to the single-tenant retail arena, the selection of a “buyer’s broker” is a very important decision in the process. Often, there are hidden responsibilities in the lease that, as a buyer, you may not know about. Using a trusted buyer’s broker, like Westwood Net Lease Advisors, will make for a smooth process and will alleviate the unknowns and the fear of entering into a net-lease transaction.
Because NNN properties are highly desirable, they are often difficult to locate, and they sell fast. That’s why finding the right NNN investment for your goals is best left to a Westwood Net Lease Advisor. We have decades of expertise working with buyers and sellers all over America and often have knowledge of properties coming to market before they’re advertised. Our advisors offer objective advice, education, knowledge, and advocacy – all without any cost to you! Contact us today for a no-obligation consultation, 314-997-5227.
*Note: Westwood Net Lease Advisors has made every attempt to ensure the accuracy and reliability of the information provided. Westwood Net Lease Advisors does not accept any responsibility or liability for the accuracy, content, completeness, legality, or reliability of the information contained herein. We are not lawyers, accountants (CPAs), or certified financial planners, nor is the information herein considered legally-binding legal advice, tax guidance, or financial counsel.