Triple net lease (NNN) real estate offers investors a way to secure a consistent revenue stream without having to play all the traditional roles and take on the many obligations of being a landlord. In an NNN lease, the tenant at the property will typically cover the major operational expenses of the property as part of the business expenses. These costs covered by the tenant usually include property taxes, insurance, and maintenance or upkeep on the space they’re renting for their business.
NNN properties can add diversity to your portfolio and help you build up equity as well. However, not every NNN property has the same profit potential over the long-term. If you’re looking for the most promising NNN lease properties to bring in solid revenue over a long period of time, then dollar stores for sale may be an excellent choice.
Dollar stores fall into a category of necessities business that is virtually recession-proof. No matter the state of the economy, people will always need the basics of food, toiletries, medicine, etc. That means that dollar stores will usually do well no matter the economic climate, ensuring a tenant can keep their business running and continue paying their monthly rent as well as their share of operating costs on the property. Some of the other types of recession-proof, NNN businesses that fall into this category include grocery stores, drug stores, convenience and gas stations, and medical facilities.
But how can you go about finding the best dollar store for sale, and determine the long-term stability and profitability of different listings?
This guide will provide some of our top tips and insights you can reference if you’re looking to purchase an NNN lease dollar store.
Focus on NNN Dollar Stores with Promising Locations
As with any real estate transaction, location is an important aspect of choosing the best dollar stores for sale. Where the dollar store is located geographically and where in town the building stands both tend to indicate the long-term potential of the store, which will factor in to how much profit you can expect to earn on your investment and how long the property will remain lucrative for you.
When you’re considering the geographical location of a dollar store, you first want to look for listings in cities or areas that are experiencing substantial growth in the population and the surrounding economy. A population boom in an area signals a greater likelihood of success for all the businesses in the area and will help you find good opportunities where areas are flourishing.
This doesn’t mean that small towns, rural areas, or suburbs don’t have good dollar store opportunities for investors, though. Dollar stores can also perform quite well in smaller towns or suburbs of larger areas as well. If the dollar store for sale is the only one in a small town, it will likely generate more business due to the lack of competition and the town having less resources for shopping.
Next, you should consider where the dollar store is physically located. The most successful stores tend to have more prime locations, on corner lots in high traffic areas and easy accessibility. Proximity to other large shopping or entertainment destinations in the area is also favorable, as the location will typically benefit from the flow of consumers coming to those anchor businesses in the area. This gives the location more visibility and helps bring in more customers who are in the area frequently already.
Pay Attention to the Dollar Store Market Prices, Rates and Trends
Successfully identifying dollar stores for sale will be highly dependent on a keen understanding of the market prices, rates, and trends. All of these factors can vary by state and city level, and may even be impacted by the physical location of a dollar store as well. The best opportunities will likely come with prime pricing and rates, so it’s critical you understand the market you’re considering so you can seek out the best deals and also find the property that presents the most potential for your investment goals and portfolio.
You should do research and have a good handle on the average market value of dollar stores in the area you’re considering and also keep a close watch on the CAP rates and any economic or other market trends that may cause short- or long-term shifts in the market.
Navigating the NNN market can be a complex process, so working with a broker who has exceptional experience and market insight in the sector will ensure that you are successful in finding the best dollar store for sale. A net lease broker can also help you through the negotiation phase of a purchase once you’ve identified the best opportunities, which will have a large impact on your profits by securing the best tenant lease terms.
Review Tenant Profile, Business History and NNN Lease Terms
Triple net lease dollar stores are a popular choice for investors who are looking to reduce or eliminate the financial obligations and time constraints of being a landlord, while also generating a steady stream of revenue from the NNN property.
In an NNN lease, the tenant takes on most of the major expenses related to the property, including taxes, insurance, and maintenance. These costs are in addition to the monthly rent payments you’ll receive for the use of the property to run their business there. For this reason, it’s imperative that you have a trustworthy net lease tenant in place to ensure the longevity of your investment.
As you’re narrowing down NNN dollar store listings that interest you most, you should look into the details of the tenant who is likely already in place and established at the location. They should have a strong credit profile and be able to demonstrate success in running the business (preferably in that location) for several years. This lowers your risk, and reduces the chances of a tenant failing and defaulting on the lease (which would mean lost revenues for you while trying to fill the vacancy).
Understand Your Financial Obligations as a NNN Dollar Store Owner
Something we discuss on every NNN property is that no triple net lease is exactly the same. While there are costs and expenses that typically pass through to the tenant and similarities in how deals are structured, every single NNN lease is exclusive to the property and tenant it outlines.
Every NNN lease will clearly outline every aspect of the lease, and it’s important that you understand all the major clauses, look for the fine print, and know how every part of the contract impacts your involvement as an owner. This will help ensure that you don’t run into unexpected expenses during your course of ownership and set you up for long-term success and revenue you can predict and count on every month.
While major expenses usually fall under tenant obligation, there may be unique clauses outlining owner responsibility when it comes to certain insurance policies. NNN leases sometimes also give the owner partial or full financial responsibility of structural repairs to the property (walls, roof, etc). Knowing exactly what you are obligated to do and pay as the property owner will help you understand your profit margins and potential with much higher accuracy and help you prevent losses in the future.
Work Closely with a Reputable Net Lease Real Estate Company to Identify the Best Dollar Store Properties and Execute Negotiations
Working with an experienced net lease company is a great way to make sure you are finding the best dollar store for sale. Brokers with expertise in this type of real estate will have in-depth understanding of the market trends and rates in their area, and they’ll also be able to advise you on the potential in all the properties you may be considering as well. Net lease brokers and advisors are also crucial for the negotiation phase of an NNN lease property, and they know exactly how to get you the best terms and also how to pinpoint any areas of risk or owner responsibilities you need to account for.
Sands Investment Group is a leading triple net (NNN) real estate company, with offices all around the nation to help with your goals in finding the best dollar store for sale. We’re the fastest growing net lease company in America, completing 2,200 transactions (worth over $4.7 Billion) since 2010. Our experienced team of advisors and brokers know the NNN dollar store market, and can help you find the property that aligns best with your investment goals.
Want to learn more about finding the best dollar store for sale and speak with an industry expert about your next investment? Wondering if a Dollar General is a good investment? Or what it costs to own a dollar store property? The SIG team is made up of experienced net lease advisors for Dollar General and all types of dollar stores. Get in touch with an expert today by calling 844.4.SIG.NNN or sending us an email at info@SIGnnn.com.