Buying and selling properties is a great way to build wealth and achieve financial freedom. Indeed, according to a CNBC report, it is still the best investment a person can make today.
Now, among the commercial real estate investments that you can consider are triple net leasehold (NNN) properties. In a way, these properties provide you with regular income without much risk.
How the triple net rental investment works
When you invest in an NNN property, you are purchasing a commercial property that you are renting from a tenant or a tenant who should be willing to pay all of the expenses of operating the property, such as maintenance, insurance, and taxes. , in addition to the rent. and utilities. However, since the tenant is responsible for these costs, the rental rate you can place on your property will be much lower than on a standard rental agreement.
Generally, you can invest in NNN properties if you are accredited with a net worth of at least $ 1,000,000, excluding the value of your primary residence or $ 200,000 of your income. However, that does not mean that you cannot engage in this type of investment if you are a small investor. You can still do this by investing in real estate investment trusts (REITs) that have NNN properties in their portfolios.
For more information on NNN which you can use to make an informed decision early in your investment journey, you should seek advice from brokers specializing in these properties.
Benefits of investing in NNN properties
While the monthly income you get from NNN properties is lower than from others commercial real estate investments, there are special benefits they bring to the table that you won’t find in other real estate investment vehicles.
Less management responsibilities
Owning an NNN property gives you the luxury of minimal management, especially if you only have one tenant. After all, the tenant will have most of the responsibility for the management and maintenance of the property, as well as the expense management.
As for you, as the homeowner, all you have to do is take care of the bookkeeping, tax filing and refinancing of the property. It gives you more time for other important things in your life.
As stated earlier, you don’t have to worry about spending a lot of time maintaining the property, as the tenant will do it for you. This is beneficial if you have a full time job or other properties to maintain.
Wide range of financing options available
Typically, NNN properties (especially those for single tenants) are written against the tenant’s credit and the market value of the property. For this reason, you will have various financing options available to you when investing in such properties.
Long-term stable cash flow
A lease on an NNN property typically spans 10 years or more. This gives you a stable stream of long-term lease payments. Unlike short-term leases, you don’t have to look for tenants every now and then when your property becomes vacant.
This is probably the best benefit of NNN real estate investing, especially if you are a small investor. Generally speaking, single tenant properties are more affordable than other types of commercial properties, with prices starting as low as $ 500,000. It means you can get your return on investment (ROI) fast enough.
Generally speaking, the benefits of NNN rental properties all boil down to more freedom on the part of the investor. This is why more and more people are attracted to this kind of business.
Finding the right NNN properties
While NNN properties bring great benefits, it is always important to know that not all are created equal. So how do you choose a property that will truly give you the best returns and help you meet your investment goals?
1. Find a good location.
Tenants come and go, so it is best to invest in an NNN property located in an area that is easy to access from the street and clearly visible to passers-by. Better yet, it should also be close to anchor storesbecause these companies help attract buyers.
Of course, you should invest in a location with high tenant demand. So, in the event that your tenant decides not to renew your contract, you can easily find a new tenant in no time.
2. To consider potential businesses that would lease the property.
The success of the franchise or the business that leases the property will also reflect the success of your investment. So, when looking for reliable NNN properties for sale, you should consider those that are previously or currently occupied by recession-proof establishments, such as gas stations, convenience stores, retail stores, chains fast food restaurants, pharmacies and auto service centers.
You can start by looking for big brands, like 7-Eleven, Walgreens, Jack in the Box, and Dollar General.
3. Check the tenant’s creditworthiness.
This is a very important step when looking to buy an NNN property with an existing tenant. Basically, you buy the property for the income stream generated from the rental payments under the lease. With this in mind, it would be good if the tenant had a good history of paying rent on time.
Regardless of the tenant, it is important to ask the seller for all financial statements that prove the tenant’s creditworthiness.
4. Get the right financing option for your purchase.
Once you’ve found potential triple net properties for sale, it’s time to find the best ways to finance your investment. Well, there are plenty of financial solutions that you can choose from. For example, you can take out a loan from your local credit union. Or, you can use your bank. Whichever route you take, just make sure the terms and conditions are suitable for your situation.
5. Seek help from an NNN broker.
A surefire way to avoid any problems when investing in NNN properties is to seek the help of a broker specializing in triple net lease. Getting started can be difficult for new investors, and these professionals can help make the process easier. They guide you through navigating the market and selecting the properties that will give you the best returns.
Without a doubt, buying NNN properties is one of the best commercial real estate investments you can make, with all the benefits it brings. It will not only take less effort from you, but also provide you with a stable source of income in the long run.
However, like any other form of investment, you should always take great care in choosing which properties to buy. Better yet, you should seek help from professionals who are familiar with the market. With them, you can select the perfect properties to add to your portfolio and help you achieve your investment goals.