The Best States for NNN Investing

Jul 29, 2021

In this exceptionally tight triple net (NNN) lease market, it pays to look at purchasing investment properties across the country. Since absolute NNN lease properties don’t require any landlord responsibility, purchasing a property with a major-brand tenant in one of the best states for triple net lease investing provides peace of mind and surety of income.

Not sure which states are the best for NNN investing and why? This article provides information based on decades of experience and the latest research on which US states we feel provide the best opportunity.

US States with No Income Tax or Capital Gains Tax

When you search for a NNN investment, it may be beneficial to look at investment-grade properties in one of eight states with no income tax, as they do not impose a capital gains tax either. Those states include Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. New Hampshire currently taxes investment income and interest, but it is set to phase out those taxes starting in 2023.

There are other states that don’t tax capital gains, even though they have a state income tax – Colorado and New Mexico. Montana offers a credit to offset a portion of the capital gains tax.

North Dakota is also one to consider. Income tax levies range from 1.10% to 2.90%; the top rate is among the lowest of the states that have an income tax.

When you factor in the annual savings of not paying income tax, or paying a very low tax, depending on your income bracket and where you purchase, you could save tens of thousands of dollars, allowing that extra income to work for you.  

2022 Update

Tax reform highlights according to the Tax Foundation (click here to see all 2022 tax changes in 22 states) :

  • Iowa is phasing out its inheritance tax; the second round of reductions, effective January 1, yields a 40% reduction in pre-reform rates.
  • After Iowa completes its reductions, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania will be the last remaining states to tax beneficiaries on the value of their inherited property.
  • Effective January 1, Arizona, Arkansas, Louisiana, North Carolina, and Oklahoma cut individual income taxes.
  • Effective January 1, Washington implemented a 7% tax on long-term net capital gains in excess of $250,000.

Evaluate the NNN Investment’s US Location

One characteristic to evaluate when determining the strength and potential of a NNN investment is its location. Though most NNN properties are in prime locations within their communities and securely backed by investment-grade corporations with long-term, guaranteed leases, understanding the property’s US location and how it may influence your success adds an extra layer of assurance.

US states and areas within those states with steady population increases can indicate a rising opportunity for success. If you were to purchase a Dollar General in one of the best states for NNN investing, you could benefit from a high-growth store with a tenant that leases from you for years beyond the original lease term, earning worry-free monthly income for decades.

American Flag with puzzle pieces that say "economy" and "growth"

Best NNN Investment States: Population Growth Mirrors Triple Net Lease Market Trends

The US Census Bureau’s 2020 census results show the percentage change of population per state from the previous census. The figures shown for the states with the highest growth percentage align with the triple net lease market growth trend. Therefore, we recommend when searching for your ideal property, consider the following states (percentage change of population shown in parentheses).

  • Utah (+18.4%)
  • Idaho (+17.3%)
  • Texas (+15.9%) no state income tax
  • North Dakota (+15.8%) very low income tax levy
  • Nevada (+15%) no capital gain tax
  • Colorado (14.8%) no capital gain tax
  • Florida (14.6%) no state income tax
  • Washington (14.6%) no state income tax
  • Arizona (11.9%)
  • Georgia (10.6%)
  • South Carolina (10.7%)
  • Montana (9.6%) credit on income tax
  • North Carolina (9.5%)
  • South Dakota (8.9%) no state income tax
  • Tennessee (8.9%) no state income tax

From 2019–2020, the five states with the highest growth rate (versus the population percentage increase from the last census) were Idaho, Arizona, Nevada, Utah, Texas – all between 1–2.12%. This doesn’t sound like much, but in terms of actual people, take Texas, for example, its population grows by roughly 1000 people per day.

According to World Population Review, “In Nevada, real estate rental and leasing was the fastest growing industry in the states by total economic output due to the growing demand for housing. Additionally, this has led to growing home prices, with the average home value currently around $307,360.”

The supply-and-demand trends in the triple net lease real estate market mirror these population growth trends. The demand for net lease properties is at an all-time high, and we don’t anticipate that changing any time soon unless there are sweeping tax law changes.

Population Growth + Economic Growth = Profitable NNN Investing

Population growth usually means economic growth, and when both are present, you have a solid success indicator for a NNN property investment. Additionally, if the state and community where you hope to invest have high or rising employment, traditionally, this brings an increase of consumers with discretionary income. These consumers contribute to investment success as they frequent NNN properties – retailers, fast-food restaurants, pharmacies, auto parts stores, convenience stores, gas stations, coffee shops, and medical and dental clinics.

Arial view of a community in the summer

How do You Find a NNN Property in a Vast Country with Countless Communities?

How do you find a NNN property in a vast country with countless communities? With thousands of Dollar Generals, Walgreens, Auto Zones, Firestone, 7-Elevens, DaVita and Fresenius clinics, you would think it would be easy. However, these prime properties sell fast, often never making it on the open market. In the current high-demand, low-supply marketplace, engaging an experienced, well-known USA triple net lease broker at Westwood Net Lease Advisors may be the ONLY way to find a property.

Moreover, whether you are new to NNN investing or you already own triple nets, this free advisory service is invaluable to purchasing the most ideal property for your goals, no matter where it’s located. A NNN lease advisor will know which states and areas within those states are growing, and just as importantly, which areas to avoid.

Even if you are a seasoned investor, never has a buyer’s advisor in your corner been as critical to getting an offer accepted on a prime NNN property and closing the deal. And there is no downside to this personal representation, quite the opposite. You can carry on with your busy life while your advisor represents your best interests throughout the entire transaction, at no cost to you.

As properties sell at a record pace, the Westwood Net Lease Advisors team is helping new and experienced investors locate and purchase triple net lease properties they never would’ve had access to any other way.

A reputable NNN buyer’s advisor will have a national network of sellers, developers, and brokers, and have his or her finger on the pulse of the nation and the countless communities where triple nets are sold.

Man stamping a contract with a "sold" stamp

To Wrap it Up – The Best US States for NNN Investments

When it comes to NNN investments, most factors are relatively equal – tenants tend to be low-risk, major brands with guaranteed, long-term leases and they typically operate in prime locations. However, once you determine the type of triple net lease asset that fits your financial goals, you also want to consider the most comfortable location for your lifestyle needs – nearby or out-of-state. With absolute triple net lease properties, there is no downside to buying in another state as there are no landlord responsibilities.

A you can see, there are many states with population growth, economic growth, and the potential to purchase a triple-net property that’s located in a popular area with high NNN tenant demand. Many of these states also offer income tax and/or capital gains tax benefits – Utah, Idaho, Texas, North Dakota, Nevada, Colorado, Florida, Washington, Arizona, Georgia, South Carolina, Montana, North Carolina, South Dakota, and Tennessee.

We feel these are the best states in which to start your NNN investment search, but Westwood advisors are also aware of many other great communities around the country with booming population and economic growth, and rapidly expanding triple net properties, and feel these are great options as well.

Westwood Logo in blue/goldTo Learn More About Triple Net Lease Investing, Contact Westwood for a Free Consultation

If you want to learn more about the best place to purchase a triple net lease investment – one that fits your exact objectives – and utilize Westwood Net Lease Advisors’ nationwide network and knowledge, let us know how we can help. Our consultations are free, as is our buyer representation. 314-997-5227


Looking To Buy Commercial Property?

Find out why triple-net lease real estate investments should be part of your investment portfolio.