Why invest in a triple net property? Because single-tenant triple net properties can provide some of the most reliable income streams in the commercial real estate investment industry. Period.
Compared to single net properties where your tenant is only responsible for property taxes alongside rent, triple net properties are ideal lease agreements where your tenant is responsible for maintenance fees, building insurance, and property taxes. However, there are certain aspects of NNN properties you may want to research carefully prior to making a triple net investment for the first time. Here’s what to keep an eye out for when investing in specific triple net properties.
Look for the right tenant
We already told you that triple net property investments can provide a stable income in a chaotic economy, which can be incredibly beneficial for long-term investors. However, because NNN investments put so much responsibility in the hands of your tenant, you want to be sure the tenant you choose is capable of handling that responsibility.
That being said, investors may want to consider tenants that provide products or services that are necessary even during a bad economy. This way, you won’t have to worry about your tenant going out of business any time soon.
What’s more, keep an eye out for tenants backed by franchises or corporations. While a big brand name can’t guarantee the responsibility of the tenant in question, these large corporations often have strict requirements for franchisees. Furthermore, Americans are often more comfortable with well-known brand names, especially in banking, fast food, and gas stations, all of which are common NNN properties.
Choose your location wisely
In order to find the best possible location for a triple net property, you’ll want to keep two things in mind: tenant demand and the ability to replace tenants quickly. While the strength of the tenant in your building does play a key role in your ROI, location is still an important part in commercial real estate.
You’ll want to invest in a triple net property that’s located in a popular area with high tenant demand. This way, whether your tenant does well or abandons ship you’ll be able to replace them quickly without any hiccups.
For instance, a tight employment market in the industries using office spaces fueled a high tenant interest during the third quarter of 2017. Leasing activity reached a two year high of 62.4 million square feet that quarter, and remains strong. Yet, already, experts say that leading banks are backing away from the commercial office space industry. Focusing on trending industries can serve investors well in the short run, but a prime location can serve you well for many years to come.
Triple net leasing provides a reliable form of income and is often a good option for those who may not have a lot of time to perform maintenance on the properties they invest in. To learn more about triple net property benefits and why so many people invest in triple net properties, contact Sands Investment Group today.