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The Importance of Location for NNN Investments

Prime NNN Location for Dependability

You may already be aware that triple-net (NNN) lease properties are great investments if you’re a high net-worth investor in the market for stable, income-producing assets with little to no responsibility, long-term reliability, and a good return that doesn’t fluctuate with market volatility. But did you know one of the most important factors for a dependable NNN investment is location?

The Quality of the Real Estate

The quality of real estate is essential to a successful NNN investment. When you begin your property search, first look for an existing, profitable, needs-based business in a prime location. Prime locations are most often high-density areas with good exposure along major retail arteries with strong traffic counts. The best choices are near other consumer staples like the pharmacy, grocery store, auto parts store, and fast-food restaurants. If the location is in a secondary or less populated market, assess whether it’s prominent and easily re-tenantable when the lease expires.

Premium, “branded” properties are usually corporate absolute net-lease tenants like Dollar General, McDonald’s, and Dunkin’ Donuts. They choose booming communities with population growth, urban renewal living areas, small towns with fewer options, university towns, and rural locations that need their services. These are favorable choices for reliable, long-term monthly income.

Nationwide Locations with No State Income Tax

As a NNN investor, you’ll realize the greatest benefit from a property that aligns with your objectives rather than focusing solely on a certain geographical area. When you start your search, you may want to look nationally, and concentrate on states that do not have a state income tax. Those states are Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. New Hampshire and Tennessee also have more reasonable dividend taxes.

According to a 2019 American Legislative Exchange Council report, over the past decade, these states have also, “consistently outperformed the states with the highest income taxes in GDP growth, employment growth, and in-state migration.” This lends itself to a more likely recession-proof NNN investment and spares a large amount of capital from income tax.

Location, along with interest rates and supply/demand, are primary cap rate influencers. Great locations typically command higher rents and provide the security of being easily re-tenanted.

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The Right Tenant Goes Hand-in-Hand with Location

The combination of the right location plus the right tenant can have a significant impact on whether your NNN investment remains a good one. Location will often be the first clue to a strong potential investment – you’ll rarely find blue-chip companies in underperforming locations. However, the reliability and creditworthiness of the actual tenant goes hand-in-hand with the location as a success factor. A corporate-backed lease provides peace of mind, but it is still imperative to ensure the tenant is credit-worthy.

Look for these property types with credit-worthy tenants in prime locations:

Owning a mix of asset classes, like single- or multi-tenant NNN properties, in strategic locations provides relatively low-risk stability and a cushion against potential ups and downs, along with the rewards of consistent monthly income, a steady return on investment (ROI), immediate and long-range tax advantages, and peace of mind.

Commercial vs Residential Real Estate comparison

To Wrap it Up – Find the Best NNN Location with a Buyer’s Advisor

Stable interest rates and cap rates, a strong market, and growth in sectors that are changing with consumer buying habits make this a great time to invest in NNN lease properties. However, finding the right NNN investment in a prime location on your own can be tricky. These properties often sell before they ever hit the open market.

Westwood Net Lease Advisors can help! We have decades of market experience and help investors, like you, invest in the right property in the best location for your goals. We get to know you and become your personal representative in the transaction from the property search to close – all at no cost. If you’re ready to buy your next NNN investment or if you’re just starting out, contact us today for your no-obligation, free consultation, and bolster your portfolio with confidence. 314-997-5227

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Tags: nnn investment properties, real estate investment property, triple net lease properties