NNN properties are a great way to add diversity to your portfolio, build equity, or add a low-risk, low-touch revenue stream that will pay consistent returns over a long time period. NNN properties are very popular with investors who want to get out of high-touch, high responsibility investments (such as apartment complexes) and into an investment that still generates income without all the time and monetary responsibilities that come along with being a landlord.
The NNN lease property market in Texas has been especially strong in the last few years (particularly in the Austin and San Antonio areas), making it a solid choice for triple net lease investments.
But how do you search through the NNN listings and find the best fit for your investment and portfolio plans?
Our guide to identifying the best triple net properties for sale in Texas will help you understand all the key factors to consider while you hunt for the perfect triple net location and provide insights you should know prior to making an investment.
Understanding the Best Types of Properties
The most successful NNN property investments are those that have potential to pay consistent revenues (in tenant rent payments) over the long-term. When you’re looking for an NNN property investment in TX, it’s important to understand the type of business operating in the location you’re looking to buy. The longevity of the business in place at an NNN lease property will have a direct impact on your earning potential over time, despite economic fluctuations.
In short, you want to look for the types of businesses that are the most recession-proof and focus on businesses that will likely continue to do well, even in times of economic downturn. A business that people will always rely on for necessities has stronger investment potential than one that may suffer in harder times.
Some great examples of recession-proof NNN lease properties include:
- Grocery Stores
- Convenience Stores (Gas Stations, etc.)
- Drug Stores (Walgreens, Rite Aid, CVS, etc.)
- Discount or Dollar Stores
- Medical Clinics
- Fast Food (Taco Bell, Arby’s, etc.)
Know the Market For the NNN Properties You’re Considering
As you’re navigating the listings of triple net lease properties for sale in Texas, you’ll also need to have a good understanding of the current market and any trends developing that may impact the value and/or price of any properties you’re interested in purchasing. You should know the current market value for businesses in the area where you’re looking and know what kind of rates you should be looking at for a purchase. It can be complex to navigate markets that are always shifting, so working with a net lease industry advisor can help ensure you don’t overpay on a property or miss a great investment opportunity due to misreading the state of the market. Net lease advisors offer key advisory services such as:
- Property Evaluations
- Portfolio Analysis
- Strategic Advice and Recommendations
In addition to guiding you through the NNN lease market, a net lease broker can also help you with negotiating the best deal on a property, and not only on price, but also tenant lease terms that will impact your profitability over the long-term.
Pay Attention to Location, Accessibility, and Traffic to the Location
Location is always a key indicator of investment property value, cap rate and longevity in profits. In NNN properties, location certainly plays a very substantial role in how lucrative the investment will be for you and can also signal the long-term earning potential.
The best triple net properties for sale in Texas will likely be in areas with high population growth and a strong economy. If there are a lot of people moving to a particular area of the state, then properties in the surrounding area are going to thrive more than areas that have slow population growth. It’s important to note, this doesn’t necessarily mean that small towns or suburbs don’t have good NNN investment potential. Oftentimes, population booms in large cities like Houston, Austin, Dallas and San Antonio will trickle into the surrounding smaller towns and suburbs, boosting the economy there and making it ripe for opportunity in triple net investments.
You also want to consider where an NNN property is physically situated in town. Corner locations in high-traffic areas that are easily accessible tend to be strong NNN investments since patrons can easily and conveniently choose that location over other similar stores or services in town. Locations in close proximity to anchor businesses (established, big-brand stores, dining, or services) also tend to do well because of the visibility and traffic to the location.
Research Business and Tenant History of Success in the NNN Locations
NNN real estate is a popular choice for investors who don’t want all the constraints and responsibilities of being a landlord. The tenant in a triple net lease deal typically covers the majority of the costs associated with the property, such as property taxes, insurance, and maintenance and upkeep costs. The tenant also pays a monthly rent sum on the space, giving an investor an ongoing source of revenue and little to no costs.
Since so much of the financial responsibility in an NNN lease is carried by the tenant, it’s important to know that person is experienced and trustworthy. A tenant with a strong credit profile and a solid business history of operating their business in a location helps ensure that investment risk is low and reduces the risk of defaults or vacancies in the future.
Read All the Fine Print of the Tenant Lease Terms and Owner Responsibilities
Every NNN lease is going to be as specific and unique as the property it pertains to, so it’s very important that you have a strong handle on everything outlined in the lease. The deal will scope out all of the tenant and owner responsibilities in detail, but you’ll need to make sure you read the fine print to know exactly what financial obligations you’ll have as the owner. NNN leases are a result of negotiations, so while there are common terms, there’s no exact template that every NNN lease adheres to. This means that you need to be diligent in understanding the terms so there are not costly surprises down the line for you as an owner.
For example, in some NNN leases, the owner is given partial responsibility for certain insurance policies or premiums. Or, an owner may be responsible for maintenance costs when it comes to the structure of the building (such as the roof or foundation).
If anything is a certainty in net lease real estate, it’s that no two NNN leases are exactly the same. Working with an experienced broker in the net lease space can help you with understanding all the terms in place in a lease, and they can also help you negotiate more favorable terms if needed as well.
Sands Investment Group is a leading NNN lease advisory (with an office in Austin to serve the area and the state) with triple net lease expertise and guidance in the market. We’re the fastest growing net lease company in America, completing 2,400 transactions (worth over $5 Billion) since 2010. Our experienced team of advisors and brokers have the expertise to advise you on all the key factors you should be considering as you look for the best triple net lease properties for sale in Texas.
Want to learn more about NNN opportunities in Texas and speak with an industry expert about your next investment? Get in touch with an expert today by calling 844.4.SIG.NNN or sending us an email at info@SIGnnn.com.