When it comes to real estate investing, investors have several types of properties to choose from. But perhaps one of the most rewarding properties for investing are single tenant NNN properties, or single tenant triple-net properties. These properties have endless benefits to offer investors, as long as they know what to look for.
What is a single tenant NNN property?
So, what exactly is a single tenant NNN property? This type of property is leased to only one tenant, usually a business, and the lease often spans 10 to 25 years. When a tenant signs a lease for a triple net property, they’re agreeing to be responsible for all of the property-related expenses, including heating, water, taxes, and even repairs. Because of the minimal responsibilities landlords are left with, these types of properties are an attractive investment.
Tenants for NNN properties could range from fast food restaurants to drugstores to office spaces. These tenants are often in the building for a long time, but the property may be bought or sold by investors during the duration of the lease. Many tenants are offered renewal options to continue their stay for even longer.
Because of the long lease terms and having to deal with only one tenant, single tenant NNN properties are a great option for investors. Not only do they not have to deal with the typical responsibilities of being a landlord, but they can also know they’ll have a steady income throughout the years.
What should investors look for in these properties?
Before making any investment purchase, you need to consider a few important factors — and these are especially important with single tenant NNN properties to take the time to ensure the best decision is being made. When looking at these types of properties, investors should first consider the location. To have a favorable tenant demand, the location of the property should be in a semi-high traffic area. Unless the tenant is going to be a nationally recognized brand, it’s important to have a location that people drive past frequently. Having a strong location will be crucial for business success and, therefore, investment success.
Additionally, investors should always conduct market research before making a purchase. If they have a tenant in mind, or even one lined up, it’s important that they buy a property in the right target market. A strong market analysis should look at the amount of traffic the property receives, the demographics for the surrounding area, and even predicted population growth. All of these factors could play important roles in how the value of the property will change over the years.
How are these properties bought?
Because of the high payout of these properties, the asking price is often quite high and is based on the property’s annual net operating income. It’s important for investors to know how much they’re willing to put down on a property and do their research to ensure the income they’ll bring in is worth what they’re paying for the property.
Real estate brokers such as Capital Net Lease work with both sellers of investment properties and developers to find potential buyers across the nation. Working with a reputable broker is important because it gives buyers access to properties that may not be listed on a public market yet. Furthermore, working with a broker will give buyers access to a large network of other buyers and sellers.
Investing in a single tenant NNN property can be a long but rewarding process. Investors should be fully aware of what they’re getting into and ensure they have an experienced broker by their side to help them choose a property that will bring them steady revenue for years to come. Thanks to Capital Net Lease for contributing.