If you’re on the lookout for real estate investments, you may have already heard of triple net (NNN) leases. You most likely know about the benefits of triple net leases if you’re looking to invest in them. Nonetheless, finding such properties is somewhat tricky since many real estate websites don’t offer features on filtering the NNN properties you want.
Triplenet properties offer various advantages: they can be low-risk investments, great for landlords who don’t want to take more responsibilities for their properties, and provide passive income for the long term. Hopefully, this article will help you decide whether or not triple net leases are a good investment for you.
What Is A Triple Net Lease?
Often abbreviated to simply NNN, the triple net is the technical term for ‘net-net-net.’ The triple net lease constitutes an agreement between the lessee and the lessor, stating that the tenant will be paying all the related expenses incurred for the property. These include property insurance, real estate taxes, and maintenance. Rent and utilities aren’t included in these payments, and landlords usually pay this financial burden if there are no single, double, or triple net lease agreements.
Tips For Investing In A Triple Net Lease For Sale
Investing in commercial properties is a good starting point for one’s real estate portfolio. You have more tenants in commercial properties than in residential real estate, and you generate more income because of this.
Commercial real estate can be challenging for investors who don’t know what they’re investing in and don’t know how to find the best property investment. Taking all of that into account, the following tips can be helpful to potential NNN investors:
1. Assess Your Finances
In general, those who wish to invest in triple net properties must have a net worth of at least USD$1 million, in addition to their current residential property asset. In the absence of a USD$1 million net worth, a USD$200,000 annual income is considered acceptable. Furthermore, you need to consider the relative risks and rewards associated with NNN investments.
If you intend to purchase a NNN property, you must determine how you plan to sustain financing for it. When deciding to invest in commercial property, you should carefully answer these question
- Is there any financial institution you know you could use, such as a credit union or bank?
- How do you plan to acquire your commercial property?
2. Choose The Perfect Lending Partner
You may find triple net investments to be all-cash deals thatseem appealing, but you should start searching for your credit or loan options early on to determine how your debt terms will unfold. Find the right business loan early so you can compare interest rates and find the best deal.
Since there may be equally attractive investments in multiple cities, you need a lender to travel and visit places with you. For those whose local banks are up for it, you might want to contact them, or you might want to engage a mortgage broker to find you deals. If you have the debt agreed upon in advance, you can underwrite the projects quickly after you’ve found the NNN property that’s suitable to your checklist.
3. Decide On Your Preferred ROI
It’s possible to get a range of returns on a triple net lease, based upon the tenant, the location, the remaining lease term, landlord responsibilities, construction year, and other aspects. Because of that, two investments with the same tenant and guarantee may have drastically different cap rates.
Investors should determine which rate of return is most appropriate for them, and then stick to that standard. If you want a 6% cap rate, don’t settle for this specific cap; there are numerous other opportunities out there for you if you do some thorough research and know the current market price. It’s advisable to do your market research before hiring a professional to help you find the best investment for you.
4. Organize Your Selections And Submit An Offer
After receiving several investment opportunities, you may want to keep everything in a cloud software folder containing information about the various sites you’re underwriting. Since you probably won’t be able to visit or tour all the properties in actuality, storing everything in one place will help you keep track of everything. You can access it easier when you need to discuss it with your financial advisor, family, or business partners.
When considering NNN investments, it’s better to utilize a secure spreadsheet where you’ve listed the good and bad sides of each property. However, it’s up to you how you choose to tackle each one. Your broker or investment advisor must draft a letter of intent to purchase a property once you’ve selected the property. And, that’s it, congratulations on your NNN investment!
If an investor chooses a NNN property wisely, it makes for an excellent investment. There are many ways to find the perfect investment for you. Taking advantage of online tools and resources will enable you to find one more conveniently than relying on other means. Like any form of investment, what you put into the project depends on your effort, time, and risk tolerance.