Inflation Investment Strategy: Reliable, Income-Producing NNN Properties

Mar 3, 2022

Historically, inflation and economic uncertainty cause investors to jump out of stocks and bonds, sell high-maintenance properties, and rethink their investment strategy. Currently, in part due to inflation being at an all-time high since 1982, the stock market is taking wild daily swings, and most commercial real estate and residential rentals have become even more unpredictable.

So, where do you invest your hard-earned capital to earn a guaranteed, contractual income for 10–20 years without inflation worries? Reliable, income-producing triple net (NNN) lease properties.

Dice that say profit, loss, risk

Investing During Inflation: Stock Market vs. NNN Investments

In uncertain times, it’s tough to trust the stock market when it’s at the mercy of worldwide relations, inflation, economic opinions, market predictions, changing interest rates, and politics. In the past, higher inflation has generally correlated with lower equity valuations.

By contrast, investing in triple net lease investments during inflation, especially absolute NNNs, can be profitable and worry-free. NNN properties are tenanted by essential businesses that tend to do well in tough times, so they can actually become more valuable during inflation.

Triple nets are responsibility-free, expense-free investments that produce a guaranteed monthly income that does not fluctuate day to day. In fact, most triple net leases include periodic rent increases to account for possible inflation.

Because a triple net lease is a long-term, legal contract with a rent guarantee from a creditworthy tenant, it will not suddenly lose value tomorrow. The physical underlying real estate value also adds a layer of security and stability to the investment.

Inflation Investing: Stock Market vs. NNN Investments

  • The stock market is higher risk and typically provides an average ten-year return of 10–12%.
  • When adjusted for inflation, stocks lose 2–3% annually, providing a realistic 7–9% return.
  • NNN properties with a 4.50–6.50% cap rate typically provide a 7–9% internal rate of return when tax opportunities, financing, and the value of the real estate are factored into the equation.
  • NNN properties provide tens of thousands of dollars of responsibility-free income with the lowest possible risk factor.

For greater detail on why triple nets can be better investments than the stock market, or at the very least, balance the risk and reward of stocks and bonds, be sure to read our dedicated blog on this topic.

Apartment complex with pretty flowers

Investing During Inflation: Gross Lease & Residential Real Estate vs. NNN Investments

As for investing in gross lease real estate (office complexes, strip malls, independent shops/restaurants) and residential investment properties (houses, apartment complexes, mobile home parks) during inflation, they are also at the mercy of market-driven variables in addition to inflation, employment strength, interest rates, pandemics, and economic trends – making these properties financially unpredictable.

Inflation Investing: Multi-Tenant & Residential Real Estate vs. NNN Investments

  • Most non-NNN commercial properties are advertised with a 10–12%, 30-year return on investment.
  • Once taxes, insurance, capital area maintenance (CAM) charges, management fees, capital expenditures, vacancies, and other components are subtracted, non-NNNs usually yield an internal rate of return (IRR) anywhere from 5% to 9%.
  • NNN properties with a 4.50–6.50% cap rate typically deliver a 7–9% IRR without any extra expenses, landlord responsibilities, or financial drawbacks.
  • NNN properties are essential in nature and often grow in times of inflation, providing worry-free, guaranteed annual income without uncertainty.

“When inflation slows the economy, consumers’ demand for low-cost, essential goods typically increases. Corporations like Dollar General, Taco Bell, Walgreens, 7-Eleven, Starbucks, Firestone, DaVita, and other major brands evolve with their customers’ needs and partner with their real estate investors to continue to grow,” said Chris Schellin, President, Westwood Net Lease Advisors.

Triple net property collage with diff asset types

What to Invest In During Inflation

As mentioned, if you’re hesitant to invest during inflation, traditionally, triple net lease investments are one of the safest (if not THE safest) asset classes on the market, offering many inflation-proof, recession-proof, pandemic-proof benefits. Most of the major brands that tenant NNN properties have only gotten stronger as a result of the Covid economy.

Since NNN tenants tend to be either investment-grade corporations worth billions of dollars, or large, creditworthy companies that guarantee to pay rent for the lease term, you can rest assured your triple net investment will continue to provide monthly income, no matter what is happening in the economy.

What to invest in during inflation? Triple net investments because they:

  • Provide long-term, guaranteed monthly income that contractually increases to cover potential inflation.
  • Preserve cash flow: no income loss or unpaid rent.
  • Build wealth with diversification and tax opportunities.
  • Yield reliable, increasing returns with little to no owner responsibility.

To create the best possible inflation-proof investment portfolio, diversify with triple net tenant types (i.e., Dollar General, Taco Bell, Walgreens), lease types (i.e., fee-simple, NNN ground lease), and locations (i.e., different states, types of communities). A well-rounded portfolio will balance risk and reward.

Only want to purchase one triple net investment? You can’t go wrong choosing one of our top NNN tenant choices.

High demand, low supply tipped on a scales

How to Find a NNN Investment in a High-demand Market

So, how do you find a triple net lease investment in a high-demand market? Since most NNN properties are selling to investors via word of mouth through nationwide broker, seller, and developer relationships, it pays to engage an expert triple net lease buyer’s advisor, such as Westwood Net Lease Advisors.

As properties sell at a record pace, we are helping investors locate and purchase NNN properties they never would’ve had access to any other way. It is the #1 way – and quite possibly the only way – you will find your first or next NNN commercial property.

To Wrap it Up – NNN Investing During Inflation Can Help You Become Financially Secure

As economic woes continue, investing during inflation can be fraught with uncertainty unless you choose triple net lease property investments. Major brands that operate with triple net leases tend to thrive in tough economic times, and with most tenants, your monthly income is contractually guaranteed for up to 20 years. Given their low- or no-maintenance nature, you can own them in any state without worry, no matter where you live.

If you’re ready to explore NNN investing and see for yourself how comparable the IRR is to other types of investments, let us know. Our advisors will help you understand the process and how to locate properties that meet your goals. From before the property search through closing, we are here to provide advice, advocacy, and resources – all at no cost to you.

Contact us today for your no-obligation conversation and see how NNN investing during inflation can help you become financially secure. 314-997-5227


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