Are you seeking a real estate investment that offers steady cash flows and high returns with minimal effort from you as the investor? Triple net lease (NNN) properties could be just the ticket! As long-term leases and low tenant turnover make these commercial real estate investments ideal, as they allow investors to leverage passive income streams while saving time managing them themselves.
As a newcomer to the NNN property market, you may feel intimidated and uncertain where to begin investing. That is why we have prepared this starter guide for those interested in investing in NNN properties for sale. So put on your investment hat, and let’s get going!
Table of Contents
- UNDERSTANDING NNN PROPERTY INVESTMENT
- Definition of Non-Performing (NNN) Properties
- 5 Fundamental Factors to Keep in Mind When Acquiring Triple Net Leased Properties for Sale
- What Are The Top NNN Properties to Invest In in the United States
- LEASE TERMS
- LOCATION AND DEMOGRAPHICS
- PROPERTY CONDITION
- Availability of Parking Spaces
- HOW TO BUY NNN PROPERTIES FOR SALE
- Conclusion
UNDERSTANDING NNN PROPERTY INVESTMENT
Prior to diving into triple-net lease properties as investments, it’s crucial that investors understand what these properties entail and their workings.
Definition of Non-Performing (NNN) Properties
A NNN property refers to any commercial real estate asset which has been rented out on an annual or multiyear lease agreement; typically these leases run five-25 years.
As a landlord, this will relieve you from managing expenses like taxes, insurance and maintenance associated with the property–hence the term “triple net”. By offloading these costs to tenants rather than worrying about them yourself as part of your investment portfolio upkeep, this allows you to focus on creating income rather than maintaining upkeep costs of an asset you own.
These properties typically are leased by established businesses such as gas stations, convenience stores, restaurants, fast-food chains, pharmacies, automotive repair shops, general retail stores and medical offices.
Benefits of Investing in Triple Net Properties for Sale
The benefits of investing in triple net properties for sale can be considerable: they allow established businesses to operate at full capacity while giving an investor ample liquidity options when investing.
NNN properties offer unique benefits that you won’t find elsewhere.
Also Read: What are the Telltale Signs of a Reliable Real Estate Firm?
Long-Term Passive Income
One of the main draws of purchasing NNN real estate for sale is its steady stream of passive income. All that is necessary to collect rent from tenants over time is collecting their rent payments – no surprises await you here.
Since these leases typically involve longer terms, you will have an ongoing source of income for years.
Lower Risk
NNN properties offer less risky investments than other real estate assets due to long-term leases and reduced tenant turnover, eliminating worries of constantly finding new tenants or having them default on rent payments.
As your tenants will typically be large companies with solid credit ratings, you don’t have to worry about them defaulting on their payments.
Also Read: Real Estate Investment Tips for Absolute Beginners
Appreciation POTENTIAL
If you purchase NNN commercial properties for sale, their capital appreciation potential may outstrip that of residential real estate due to rapid increases in value over time.
Tax Advantages
Investment property offers many tax advantages, including depreciation deductions and cost segregation write-offs that can help offset income taxes each year, giving you more of your profits back from your investments.
As can be seen, NNN investments offer many advantages, so let’s now examine how to find suitable triple net leased properties for sale.
5 Fundamental Factors to Keep in Mind When Acquiring Triple Net Leased Properties for Sale
As with any real estate investment, when purchasing triple net leased properties for sale you should do your due diligence to make sure you invest your money wisely. Below are five fundamental criteria when evaluating potential properties.
Tenant Creditworthinness
Most NNN property investments involve purchasing properties leased out to established tenants. When evaluating potential investments, it’s crucial to research these tenants thoroughly – it is better to invest in properties rented by strong businesses with established track records rather than taking the chance on unfamiliar ones.
Also Read: The Real Estate Development Process – Viable Design
What Are The Top NNN Properties to Invest In in the United States
Looking for some great NNN investments to put money in? Below are seven of the best brands from various sectors for consideration when investing.
*7-Eleven has been around since 1927 and remains one of the most iconic convenience store chains, boasting more than 8,000 locations nationwide.
* Walgreens – When it comes to pharmaceutical solutions, Walgreens stands out as a trustworthy option. As one of the largest drugstore chains in America and with one of the highest profitability and recognition, this retailer can be counted upon.
KFC is one of the world’s best-known fast food franchises with an expansive customer base and often long-term lease agreements in place.
* Dollar General stands out among variety stores as being particularly sought-after – their popularity being evident by long-term lease arrangements in place for this name alone!
* DaVita Dialysis – Renowned medical care and dialysis provider DaVita operates over 2,000 facilities with more than 30,000 physicians on its roster, while O’Reilly Auto Parts stands out among competitors as a premier source of automotive parts and services.
* Starbucks – When people talk about coffee, one of the first names that come to mind is Starbucks. This global brand is one of the best-known in its field and can be found across major cities worldwide.
These are among the top investments for triple-net lease properties. For a comprehensive listing, visit NNN Deal Finder.
LEASE TERMS
Lease terms encompass everything from length of rental agreement, rental payments and renewal options to tenant responsibilities and rights. They can differ depending on who your tenant is so it is wise to review each one carefully prior to signing any document.
Make sure that the terms are favorable for you, with rent increases included to protect your income over time. Also make sure there is an option for renewal after its expiration date so as not to have to find new tenants every few years.
LOCATION AND DEMOGRAPHICS
NNN properties that offer maximum returns tend to be situated in areas with a high volume of foot and vehicle traffic, thus guaranteeing their tenants with consistent customers who pay rent on time.
So when evaluating properties to purchase, take time to research the demographics of their neighborhood. Consider factors like population density, estimated income level, education level levels, number of businesses in the neighborhood and unemployment rate as you research potential properties to buy.
Consider whether or not an NNN property is located near major highways and public transportation hubs to assess its profitability as an investment option. All these indicators will give an indication of whether investing in that particular NNN property could prove profitable for you.
PROPERTY CONDITION
Before investing in triple net properties for sale that are in disrepair, take an extensive inspection. Pay special attention to its condition – is it old or recently renovated, do HVAC/plumbing systems need replacement, are there any safety hazards present and so forth.
Your budget should also account for any furniture, appliances, or improvements that need to be completed at your property. If there are major renovations required, factor this cost into your plan.
To ensure you invest in an ideal property, it is wise to hire a professional commercial property inspector for an in-depth inspection. They possess both experience and an eye that can spot potential problems that are otherwise invisible.
Availability of Parking Spaces
An important indicator of an NNN property’s profitability is the presence of parking spaces. Not only can this make customer visits easier, but parking spots also increase rental value and potential appreciation over time.
When assessing potential properties for sale, pay particular attention to how many parking spaces there are available. If there aren’t enough spots, inquire if additional ones could be constructed with permission from your zoning commission.
HOW TO BUY NNN PROPERTIES FOR SALE
Armed with your knowledge of what to look for when evaluating potential NNN properties for sale, you are now prepared to purchase your first property. Here are the steps you should take.
Step 1: Determine Your Financing Method
To finance an investment property, there are various financing methods you may take. If purchasing without using your own funds, options include mortgages, commercial equity line of credit (CELOC) or angel investors as potential funding solutions.
Keep in mind that loan terms and conditions differ between lenders; thus, it is wise to gain as much insight as possible before entering into an agreement.
Step 2. Identify Potential Properties
Now is the time to identify potential properties for investment purposes that meet your criteria. Begin by compiling a list of homes available in areas with favorable demographics and strong rental demand; be sure to review all available information about each listing in depth before making your selections.
Real estate professionals specializing in non-performing loan investments will be your most useful ally during this process.
Step 3. Make an Offer and Negotiate Terms
After finding a property that intrigues you, the next step should be making an offer and negotiating terms. Before doing this, however, it is advisable to conduct research into commercial real estate values in the area in order to make an offer that accurately represents how much similar properties have sold for in recent sales.
As many sellers are open to negotiations on price and terms, be prepared to negotiate on them too.
Step 4. Review Documents and Finalize Purchase
Before signing any documents and finalizing your purchase, carefully review each one to make sure it suits your interests as an investor. Consult a real estate attorney if anything remains unclear to you.
Once everything looks satisfactory, sign the contract and finalize your purchase.
Step 5. Complete Closing Procedures
Once the documents have been signed and filed with local authorities, completing some closing procedures must take place before taking ownership of the property. This may involve paying any necessary taxes and fees such as transfer taxes and title insurance premiums that may be mandated by law or local governments – such as transfer taxes.
Once everything is finished, congratulations! You are now the proud owner of an NNN property.
Conclusion
Investment in NNN properties for sale can be an excellent way to generate passive income and build wealth, but you must remember that real estate investing involves much more than simply buying properties. Proper due diligence must be performed when analyzing potential assets, securing financing to cover closing expenses, negotiating favorable terms for negotiation agreements and fulfilling all closing procedures successfully if you hope to become an experienced NNN investor! By following this starter guide as your guide and following these steps closely you’re well on your way towards becoming one!
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