The Most Overlooked Triple Net Lease Investment Opportunity

Oct 21, 2021

What is the most overlooked triple net (NNN) investment opportunity and how do you get one before the secret is out? When it comes to triple net opportunities, there are some very profitable property and tenant types that are overlooked when buyers first begin their investment journey. These single-tenant properties offer all the same benefits as their more popular cousins, including but not limited to reliable monthly income, tax advantages, and a recession-proof business model.

Beyond Fast Food NNNs: Gas Station & Convenience Stores, Early Education Centers, Car Washes

Typically, when commercial real estate (CRE) buyers come to us with interest in NNN investing, the first property type they usually talk about is fast food. These properties are highly advertised and the most well-known for operating with responsibility-free, corporate-guaranteed leases.

Yes, fast-food restaurants, drive-thrus, and quick-service restaurants (QSRs) are great NNN investments, as are Dollar General and Walgreens, but don’t miss the following overlooked NNN opportunities (we couldn’t choose just one!). They just might offer the diversification your portfolio needs and financial returns that exceed your expectations.

  1. NNN gas stations & convenience stores
  2. NNN early education and child care assets
  3. NNN car wash properties

1. NNN Gas Station & Convenience Stores

Gas station area with convenience store attached

Gas stations with convenience stores are more popular than ever for shoppers who not only want snack items and a beverage, but also grocery essentials, meals, auto accessories, and more. During the pandemic, c-stores like 7-Eleven and Wawa became even more essential to their communities and expanded their offerings, as well as the number of locations. This increases investor availability.

What makes this property type one of the most overlooked? CRE investors just don’t think “gas station/convenience store” when they think about NNN investing. The assumption is that they are owned and operated by the gas station brand. In most cases, this is not true. The gas station brand runs the operation and leases the property from the NNN real estate investor.

Gas stations for sale are typically located in high traffic areas on valuable parcels of land, backed by creditworthy corporations, and they most often operate with triple net leases. Gas stations are a great investment option for any lifestyle, financial requirement, and portfolio. New gas station/convenience store properties are generally in the $2–4M range.

2. NNN Early Education Centers & Child Care Assets

The front of a new Guidepost Montessori school

Early education centers and childcare assets, such as Kinder Care, Guidepost Montessori, and The Learning Experience, offer growth, stability, long leases, and better cap rates than most investors would expect.

These income-producing investments are often overlooked due to the perception of unpredictability or for being high risk, however, that is not the case. Child care assets are an essential service, typically found in higher-income areas, and the staff and owners get to know the parents and community, which creates trust. That trust and the predictable monthly or yearly tuition rates create sales stability often not found in traditional, gross lease CRE.

For the NNN investor, an early education property can offer a solid rate of return from a creditworthy tenant who typically operates with a guaranteed burn-off on a long-term lease (15+ years) and takes good care of the property. Sometimes, the landlord is responsible for roof, structure, and/or parking lot, which is typically reimbursed. Look for these properties in prime locations with high resale or re-tenanting possibilities. Child care assets range in price up to $5M.

Child care property expansion is planned for the next 12 to 24 months, creating a short window of opportunity to purchase without a lot of competition. For more in-depth information about how to invest in an early education or a child care property, be sure to read our Tenant of the Quarter blog.

3. NNN Car Wash Properties

2 Cars coming out of a car wash with the big brushes on either side

Investors rarely come to us saying they want to purchase a car wash property; however, this asset type is one to consider. The car wash industry is opening locations at a rapid pace. Many are regionally operated, such as Tiger Express Car Wash, but there are also larger nationwide companies that operate with NNN leases, such as Mister Clean Carwash, International Car Wash Group, and Zips. Both multi-unit regional and national corporate operators offer investment stability and potential profitability.

This industry is growing for many reasons, but it’s opened up to NNN investors due to numerous car wash operators seeing the value in selling their real estate to private investors, who see the intrinsic value in the property. In this case, when selling, they will often perform a sale-leaseback transaction with a full-term NNN lease agreement. The lease will most likely be guaranteed for 15 to 20 years with fixed increases. When new builds come on the market, they are also typically NNN lease transactions.

Car washes offer several different property and lease options, so if you’re looking for a car wash for sale, it’s best to engage a buyer’s advisor to ensure there are no hidden lease clauses or unwanted landlord responsibilities.

The next 12 months look strong for car wash triple net deals, including more sale-leasebacks and cap rates that rival those of other top national brands. Car washes typically sell in the $2–4M range.

Car washes are located on main throughfares near other consumer staples, which makes location a driving factor in their value.

How to Purchase a NNN Lease Property

Triple net property buyer's advisor consulting with client, showing graphs and charts and other paperwork

The best (and maybe the only way) to find a convenience store, child care asset, or car wash for sale, and be a contender for purchase in the current, high-demand market is to engage a knowledgeable, well-known, NNN lease advisor who also specializes in the 1031 exchange.

These assets tend to be unique in their lease structure, which requires years of experience, thorough due diligence, and negotiating skills to make sure you get exactly what you want and nothing that you don’t. And, just like other NNN properties, they often sell before they hit the open market, which is why working with an advisor with a vast network of sellers, brokers, and developers can help you get the property you want at the price you’re willing to offer.

If you are selling a high-maintenance or underperforming property to trade into a low-maintenance or responsibility-free property using the 1031 exchange, a convenience store, early education asset, or car wash is a great option.

The simple, responsibility-free, income-producing nature of absolute triple nets keeps them in hot demand in any economy.

To Wrap it Up – NNN Properties that Are Often Overlooked Can Diversify Your Portfolio

When it comes to NNN investing, we feel all triple nets offer great opportunities as 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. Though often overlooked, convenience stores, early education properties, and car washes fit those characteristics and make a wise addition to diversifying your portfolio.

If you want to learn more about these and other NNN investment types and find the one that fits your exact objectives, let us know how we can help. At Westwood, 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.