Imagine receiving a responsibility-free monthly check like clockwork for the next two decades. How about the idea of that check coming from a multibillion-dollar corporation like Walgreens, McDonald’s, or Dollar General? A corporate triple-net-(NNN) lease is a 10- to 20-year lease where the tenant pays the net amount of taxes, insurance, and common area maintenance charges. As a NNN lease investor, a corporate lease from a credible tenant carries many landlord benefits, including long-term, safe, hands-off income and the peace of mind that comes with it.
Why do Corporations Prefer NNN Leases?
When you see a KFC or Dunkin’ Donuts you can recognize them without seeing the signage; you know their brand just from certain building attributes. Corporations prefer NNN leases for many reasons, brand uniformity being one of them. The property location and the state of the building and grounds are imperative to their business operations. These high-credit tenants willingly pay the real estate taxes, insurance, capital area maintenance charges (CAM), and capital expenditures – they want complete control of the aesthetics of the building, inside and out.
Leasing rather than owning also frees up capital for more locations with fewer real estate holdings to manage. The reliability of a long-term NNN lease with predictable expenses and pre-set rental increases provides fewer financial surprises and more stability for both corporations and investors.
These desirable occupants include fast food, auto parts stores, casual dining, banks, pharmacies, dollar stores, gas stations, medical clinics, industrial, manufacturing, warehouses, storage facilities, retail giants like Wal-Mart and TJ Maxx, and others.
Absolute NNN Lease Responsibilities
As an “absolute NNN lease” investor, you do nothing but collect rent checks while the tenant takes care of everything. Many national corporations that want brand uniformity, such as Applebee’s, CVS Pharmacy, and Dunkin Donuts and many more, choose to operate with this type of NNN lease, which completely absolves the landlord from any financial or physical responsibility whatsoever. They willingly do their own maintenance, use their own vendors, order their own signage, pay for CAM and operating expenses over and above CAM, and capital expenditures.
Landlord Benefits of a Corporate NNN Lease
As you’re conducting your research, you’ll see that it’s hard to find fault with a NNN corporate lease investment. Most are “absolute” net leases, which completely relieves the landlord from any financial or physical lease responsibility whatsoever.
There is no day-to-day management. Your multibillion-dollar tenant will be a reliable occupant who provides consistent monthly income for 10-20 years while you build your portfolio and reap the annual tax benefits.
Due to the financials of your corporate tenant, securing positive financing terms is likely. The factors that lead to favorable terms start with the security of owning a physical asset in a prime location. The worth of the underlying real estate itself and the excellent credit of the tenant also add to the equation.
Often, a corporate tenant will stay beyond the initial lease term; if your asset is paid off, your profits may significantly increase. Additionally, if you should ever need or want to sell, the longer the lease term left, the potential exists for a higher property value. Trading-up to another more lucrative NNN lease investment is also an opportunity for a tax-free 1031 exchange. The benefits are many, owner responsibility is minimal.
- Passive, guaranteed income from anywhere in the country.
- A reliable, low-risk investment.
- Preservation of wealth and stable investment diversification.
- Opportunity to build equity over the lease term.
- Permanent, tangible asset and value that will not fluctuate day-to-day.
- Annual tax benefits and 1031 exchange opportunities.
- A possibility of owning your NNN property debt-free at the end of lease term.
- No active property management.
A Great Corporate NNN Lease Example
Listed among the top 10 retail companies in the world with 4.1 billion dollars in net earnings in 2017, Walgreens specializes in prescription drugs and convenience shopping for household items. Walgreens is an A+ rated company with 25-year triple-net leases and no landlord expenses. This means no worries about collecting rent on time or owning a vacant building. Many lenders will lock in fixed self-amortizing loans for those 25 years.
Walgreens stores are in tremendous locations with the potential to extend their leases over long periods of time. Most of them are on 1.5-acre lots on major corners in main areas. Their buildings are not too large to lease to someone else if Walgreens decided to move out in 25 years. Walgreens is considered a top-of-the-line tenant in the world of triple-net leases and a conservative long-term investment.
To Wrap it Up – No Downside to Owning a Corporate NNN Lease Investment
Triple-net lease investment properties with high-credit corporate tenants are becoming more popular as investors receive lower returns on other types of investments and assets. When chosen wisely, the right NNN lease investment can be a harmless, reliable venture that preserves cash flow and yields a passive, income-producing return for decades.
Buyer beware – if you decide to explore a triple-net investment property, you need advisors, not salespeople. The buying process can be complex – you need a personal representative who knows you, your goals, and the marketplace. Like no other firm in the United States, Westwood Net Lease Advisors focuses on representing first-time and experienced buyers with every step, from the property search through closing. We are passionate about representing your best interests – at no charge to you.
While you continue to work your full-time job or as you settle into retirement and enjoy life, contact us. We’ll simplify the process and to do the legwork for you. There’s no accounting for the peace of mind offered by a NNN lease investment, knowing your wealth and monthly income are sound for years to come. For more information, get our free Inside Guide to Triple-Net Leased Investments or contact us today for a no-obligation consultation, 314-997-5227.