Although not exclusively, the triple net lease will mostly be used within the single-tenant, freestanding commercial buildings, retail properties, or asset types such as office buildings, industrial parks, shopping malls, bank buildings, pharmacies, and restaurants.
But, if you’re interested in NNN investing, and looking to buy one of the NNN properties, a little more granular search can provide better insight and answers to the questions like: Are NNN properties good investments, or how do I begin my triple net investing?
Let’s take a look…
Are NNN Properties Good Investments?
NNN properties provide some of the most stable income streams in the commercial real estate investment industry. Here, the tenant absorbs all the costs and responsibilities for using the property, including:
- Property taxes
- Insurance premiums
- Maintenance and repairs
Why should you consider triple net investment properties? NNN investing is very appealing from a commercial investment standpoint and all due to the many benefits offered to both parties – property owners and tenants.
First of all NNN properties are a good investment since they are structured as long-term tenant occupancy contracts, which annulates the risk of property degradation.
Low Risk and Little to No Landlord Duties
Secondly, NNN property investing is extremely low risk and provides a reliable income stream. It includes a consistent rent each month over an extended period of time, and passes along all the property expenses, starting with taxes, maintenance checks, etc.
Great source of equity
Also, NNN investing is a great source of equity for your future investment. Many investors hang on to triple net property investment and use it as an equity builder. Then they sell the property when the market price peaks or population spikes, and use that equity in their next CRE venture.
So, yes, NNN investing is a good way to invest in your long-term goals with little risk of losing the property or leaving it to decay because no one wants to live there.
How to Find the Best NNN Properties for Sale
Although triple net (NNN) leases are common practice these days, finding such properties for sale is a whole different story.
Many real estate selling websites do not offer to filter their results to NNN property search, so if you’re looking to buy a triple net property, here are some tips on conducting an NNN property search. Usually, there are five noteworthy markers to consider if you’re doing NNN property search
The tenant “filter”
In the NNN investing and NNN property search, commercial tenant information can be a lucrative part of the strategy, knowing that this intel can unlock the door to a plethora of new opportunities.
Tenant-type examples could be restaurants, businesses, or franchise names in any specific property, etc. You can also conduct a NNN property search and analyze any property you come across by checking who the current tenants are.
Add a List of Preferable Locations
Triple net lease properties are typically situated in a great and accessible location, proximal to other popular businesses. This helps gain traffic and exposure to customers who travel from other areas.
A well-organized list of preferable locations is what carries that effective NNN property search through to your closing efforts. First of all, you must understand your niche, and position yourself in such a neighborhood that provides future success.
Whether online or in-person, (public) property records can work as a source for you to attain leads based on a property’s address, but also provide great insights into a property, and give you a bit on past transactions.
NNN property search by location also lets you search for asset type by state, city, county, zip code, even specific street or exact address.
Property search by location and asset type is especially important when investigating multifamily properties.
Look for Opportunity Zones
Opportunity Zones can be found in every state, with low-income communities that can actually stand to bring substantially greater earnings to long-term commercial real estate investors.
The potential market for reinvestment in areas of undeveloped or underdeveloped real estate is unquestionably massive, promising rise to a new world of opportunities for those contemplating investing in commercial real estate.
NNN investigating by asset type
The NNN property search by asset type lets you choose the kind of property you’re looking for. This includes office buildings divided by classes, retail, industrial, medical as well as many sub-classes of each.
Search Off-market Prices
Off-market NNN property search is important so you can identify whether some owner of the NNN property is likely to sell or not. Here you should come across the most recent sale dates, property prices, some more property owner information, etc.
How Do You Finance NNN Properties?
Buying a commercial real estate investment property has some specific terms. The investor has to possess a minimum accredited net worth of 1 million dollars to even be able to acquire a federally insured bank or credit union, or even a private lender – which are always more “expensive”.
There are of course other channels opened to smaller investors, including REITs, or real estate investment trust funds geared specifically toward NNN properties for sale.
Risks of Buying Triple Net Lease Properties
The NNN investing as well as many other types of CRE investing has some limitations that both parties should understand before entering a long-term lease agreement.
Limitation to Your Rental Earning Growth
The first risk you as a landlord will have to take is to know that no rent uprise is not allowed once the lease is signed – even if the property value spikes. This is kind of a limitation to your potential earning growth.
The Possibility For Unreliable Tenants
Also, there is always the risk of the tenant failing to meet his obligations. Since investing in NNN properties signifies buying physical assets and (in a way) – the tenant who settles there, it is important to always consider that tenant’s investment credit rating! The more stable their monthly income is, the less likely they are to fail and not to pay rent.
