Investment grade triple net-lease (NNN) properties are a valuable and powerful addition to your 1031 exchange program or your investment portfolio. Many investment advisors now recommend
that investment grade triple net leases are included in well-structured investment portfolios.
Note that if you use a properly-structured 1031 exchange to acquire your triple net lease property, you may well be able to defer your capital gains taxes indefinitely, with the result that, in effect, the government is giving you an interest-free loan for an indefinite period!
What is a single tenant, net-leased investment?
Essentially, a single-tenant, net-leased investment gives
you total (fee-simple) ownership of a free-standing, single-tenant commercial property, which is pre-leased to a high credit retail tenant – Walgreens, Jack in the Box, Wal-Mart, or Best Buy, for example – on a long-term basis, providing you with a stable, long-term cash flow. In the case of a triple-net lease, your tenant will be responsible for the operation, maintenance, taxes, repairs, and improvements to the property.
To illustrate:
Walgreens is your tenant for a non-cancelable, 25-year period. The tenant is responsible for all costs to operate and maintain the property. In many cases, when the lease expires, you will own the property free and clear. This is sometimes referred to as a “care-free” or “absolute” Triple-Net lease because, as far as you are concerned, the only management required is a trip to the mailbox once a month to pick up your rent check. Triple-Net lease ownership is ideal for first-time real estate investors as well as for savvy veterans seeking to simplify their holdings by selling off management-intensified properties and trading into less complicated real estate holdings.
The price range for a Triple-Net lease property is generally between $500,000 and $7 million. The dollar stores and fast food restaurants
are the most affordable, while drugstores are on the higher end. Big box retailers such as Home Depot, Lowe’s, and Wal-Mart
can bring from $15 million to $25 million. To view our large inventory of Triple-Net lease properties, visit our Inquiry
page or call us toll-free at (866) 638-1031.
Because most investors borrow funds to acquire Triple-Net properties, it is essential for them to work with a qualified mortgage broker to find the best possible financing
for the type of property being purchased. An analysis of factors such as the tenant’s credit, location, capitalization
rates, and loan terms is essential to determine the cash flow and security of a Triple-Net lease investment.
The minimum down payment usually required by lenders is 20 percent to 25 percent for investment grade tenants and 25 percent to 40 percent for most other tenants.
With a Triple-Net lease, you generally own the building and the land, but ground leases, where you own the land only, are also popular. We will take the time to explain the advantages and disadvantages of each of these investment options. Our customers have come to depend on our investment specialists for extensive value-added services, including educating them about the relative merits of alternative investments, analyzing cash flow and debt service, researching tenant credit, the merits of one location over another and much more.
Whether you are acquiring a ground lease or the more traditional Triple-Net lease investment, you will own a 100 percent, undivided interest in the property. This is not a tenants-in-common arrangement, where you own only a portion of a property, sometimes with 30 or more partners.
The advantages of owning a Triple-Net leased property...
There are many excellent reasons to acquire an investment grade net-lease property for either a 1031 exchange or safe, dependable monthly income, including...
- You can defer capital gains taxes through a 1031 tax-deferred exchange.
- Triple-net leases are either 100 percent management-free or require very little involvement from the landlord.
- Triple-Net lease property has high residual value and is a liquid investment.
- You can get non-recourse, fixed financing for more than 10 years with Triple-Net lease properties.
- There are no vacancy factors, tenant improvement costs, management fees, or leasing fees.
- Location! Location! Location! Properties are typically in prime retail areas with high traffic counts and great demographics.
- You don’t have to worry about tenant turnover. Your tenants sign leases of 10 to 25 years.
Why do investors favor NNN properties over traditional apartments, home rentals, office, industrial and retail shopping centers?
The most important reason investors like NNN properties is the simple enjoyment of owning income property without the hassle and expense of devoting time and money to the management of the property and at the end of the lease term you may well own the property free and clear.
To contact a Net-lease specialist either fill out our brief Inquiry Form or call us Toll-free 866-638-1031. |
