One of the most attractive real estate investments is the triple net properties. These properties gain all attention owing to a variety of factors. These offer a low risk, minimize landlord responsibilities, and generate passive income.
Now that a world of benefits impresses you, you wonder if they’re worthy of adding to your investment portfolio or not? But, before going to that, you first need to know the meaning of Triple Net Lease or NNN.
What Is an NNN lease?
A Triple Net Lease (NNN) is a type of commercial real estate lease structure where the tenant is responsible for paying additional expenses beyond the base rent. These costs typically include property taxes, building insurance, and maintenance—commonly referred to as the “three nets.” The tenant usually pays these costs monthly, along with their rent. Understanding how these expenses break down is crucial for both landlords and tenants. For a clearer understanding, reviewing a triple net lease example can help clarify how this arrangement works in detail and what both parties are responsible for.
Now that you’re a business owner, who’s looking out to avail the advantages of a triple net lease, here are some steps that you need to take into consideration while deciding to invest in NNN properties. These are:
Determine the Investment Returns
These lease investments come in a wide range of returns. They’re usually based on the tenant, lease term, location, construction year, landlord responsibilities, etc. Thereby, two investments with the same guarantee and tenant guarantee upon the varying cap rates.
As an investor, you’ll want to determine the return that makes the most sense to you. Also, you’ll have to stick to the criteria. Thus, when you’re searching for a Triple net lease for sale with a 5.5% cap rate, the experts suggest never settling for a lesser return, that is 5%. Ensure that you have a world of opportunities in your investment range. All this happens after apt market research and current pricing knowledge.
Thus, always do your market research to gain knowledge of the landing cap rates.
Find Your NNN Advisor
Once you understand your interest areas, it is always better to have open conversions with your team. The entire essence of the communication process helps in determining the best fit for yourself and the team.
Reaching out to an advisor, you’ll be able to find an ideal investment, indulge in due diligence, and watch yourself set up for success.
When interviewing investors, you’ll also see the broker experience with different types of investments. Thereby, always have an experienced and knowledgeable advisor by your side.
Set the Term Criteria and Tenant
Not all triple net leases and tenants are created equally.
You may be surprised to find that some NNN investment opportunities may have an attractive cap rate. However, it is only after digging into some essential information; you get to know that the lease has three years to go. Thereby, it is necessary to set your term criteria and tenant on the front end for narrowing your search.
Compare Opportunities and Submit an Offer
Once you’re receiving the potential investment opportunities, it is always a just and wise idea to have cloud storage by your side. It won’t be possible for you to keep up with every property. Thus, it is always good to have all stuff in one place. After deciding the property, reach out to your broker for drafting the letter of intent for property purchase.
After having all things clear, turn a keen eye on the tenant selection to make quick decisions.
Triple Net Lease: a Win-Win Solution for Both Landlord and Tenant
Triple Net Lease or NNN lease is a good option for both tenants and landlords. Under this agreement, the tenant has the freedom to choose their structure, wherein they can customize their space. After all, they get brand uniformity without even thinking of a capital investment of a purchase. Another lucrative option is that these are pretty flexible. You get insurance increases, caps to tax increases, and others.
For the landlord, triple net leases are a reliable income source with significantly less overhead costs. The landlord plays no active role in property management. Also, he’ll be able to enjoy the long-term steady cash flow.
