Real estate investing is a competitive business today, even at the best of times. And this means it’s the perfect time to get into the market. There are all sorts of different kinds of NNN properties for sale in the market right now, but that just makes it all the more important for you to keep your wits as you search for that perfect combination of low cost-to-value ratio and attractive return on investment (ROI).
Luckily, there’s a strategy you can use to create an extensive list of great locations that will be reliable in any real estate market.
What Is a Triple Net Lease (NNN)?
A triple net lease (NNN) is a commercial real estate investment that allows investors to enjoy high yields through reduced risk and little exposure to operating costs. It is also one of the simplest forms of real estate investment because it does not require extensive management or control once set in place. Triple net leases can be a great way to invest in retail space, office buildings, industrial warehouses, and other types of commercial real estate.
A triple net lease (NNN) property is a property that includes three components:
- Net rent: This is the base amount of rent paid by the tenant to the landlord. It does not include operating expenses or property taxes.
- Property management: The actual cost of managing the property falls on the landlord, including agency fees or commissions.
- Taxes: Property taxes are paid by both parties and should not be included in either party net rent calculations.
How Does It Work?
In this arrangement, you will receive monthly rent payments from your tenant without paying for extra expenses associated with owning or operating the building. Repairs, maintenance, and utilities such as water and electricity are all included.
As an investor, you will get consistent cash flow from your tenant without worrying about huge expenses connected to building ownership, such as taxes or insurance premiums.
Why Do You Need It?
Real estate investors who seek out NNN properties for sale have the benefit of generating money without having to manage the property themselves or having time restrictions that prevent them from becoming their landlords.
For example, if you’re looking to purchase an apartment complex with units that require monthly repairs or maintenance but don’t have the time or money, buying the property with a NNN lease is a great choice.
Alternatively, an NNN lease makes sense for your situation if you want to invest in commercial real estate without having to worry about maintaining it on top of managing your business or managing staff.
Benefits Of Triple Net Leases for Investors
There are many benefits associated with this type of lease agreement including:
- Easier budgeting. It’s easier to budget for expenses when you know exactly what your costs will be each month.
- No surprise expenses. You will not have any unexpected expenses due to maintenance or repairs because they are covered under your lease agreement.
- Improved cash flow. You’ll have more cash available if you don’t have to make payments on other types of leases, such as those that require you to cover taxes and insurance costs yourself.
The Risks Associated With NNN Properties
The types of risks associated with NNN properties are the same as those associated with any other commercial lease. However, because tenants may have more responsibility than property owners in maintaining their space, potential investors need to understand these risks so they can determine whether NNN properties are right for them.
The most common risks associated with NNN leases include:
- Tenant-related risks. Tenants may fail to pay rent or damages, which can result in costly litigation and evictions.
- Property-related risks. The physical condition of the property may deteriorate due to lack of maintenance or repair and maintenance costs may be higher than anticipated.
- Market-related risks. The demand for office space may decline and vacancy rates rise, which could lead to decreased rental income for the investor.
One way to avoid these risks is by working with professional management companies who handle leasing agreements on behalf of their clients. By working with an experienced management company, investors can focus on managing their other properties while knowing that the leasing process has been taken care of by someone else.
4 Factors to Consider When Finding NNN Properties for Sale
Finding a property that meets your investment goals is the first step in securing a high-yield, low-risk NNN lease. Here are five tips to help you find the right property:
There are questions that you must answer if you’re buying NNN properties for sale in California, for example. Where exactly is the property located? How accessible is it? What amenities does it have? Is there enough parking space? Is it close to schools, hospitals or shopping centers? Is it located in a good neighborhood?
2. Property Type:
What type of property are you looking for? Do you want an office building or retail store space? Are there any special requirements like drive-thru windows or patio seating? Think about how your business will be affected by any changes in location or other factors and make sure they match up with what you need from your property before making any final decisions.
3. Purchase Price:
What kind of price range can you afford? Make sure that the price tag on this particular piece of NNN real estate for sale matches up with what your budget allows so that there will be no surprises when closing time comes around.
4. Cash Flow Projections:
How much money will come in during each month or year of ownership? More money coming in equals less risk as an investor because there’s no chance of losing money on repairs or maintenance costs.
5. Property Records:
Look for a triple net lease property for sale that has tenants who are paying rent on time, no major liens against them, and have no history of disputes with other landlords or tenants. The tenant should also be paying their taxes and insurance on time. If not, you may need to cover those costs as part of your lease agreement, which can eat into your profits.
Where Can You Find Triple Net Properties?
Here are a few ways to locate triple net leases (NNN):
1. Online. One of the easiest ways to find these properties is through online searches. Many online tools such as an NNN deal finder website can provide real estate investors instant results for NNN properties for sale in Georgia or anywhere in California.
2. Real estate agents. Real estate agents are another way to find NNN leased properties for sale. They understand the local market and can connect you with any property you’re looking for.
3. Networking. Networking events with other investors and real estate professionals is another way to find the best NNN properties to buy. You can learn about upcoming investment opportunities at these events as well as connect with other investors who may be able to refer you to properties that fit your portfolio needs.
The NNN property market will continue to thrive in the coming years, providing investment opportunities that are difficult to find elsewhere. However, investors must still do their due diligence if they hope to achieve the best returns on their investments. We’ve outlined some important tips here — make use of them, and let them be your guide as you get started on your journey to a successful investment.