Triple Net Properties: How to Invest and What to Look For
It’s no secret that single-tenant triple net (NNN) properties can be reliable, passive income streams. When you’re looking at a triple net lease for sale, it’s important to take all the fine print into consideration. Here, we’ll review some key insights on how to invest and what to look for in a triple net property:
What is a triple net property?
In this arrangement, the tenant pays a monthly rent, as well as covering the property’s operational costs. Triple net properties provide a hands-off approach with a reliable income return over the long term, making them incredibly attractive to investors. NNN properties also offer a slow, steady return for your investment over time.
How to Invest
First thing’s first – before you invest in a NNN property, you must have a net worth of at least $1 million. This excludes the value of your primary residence. If you don’t meet these criteria, you may still be able to invest if your annual income totals over $200,000.
You also want to ensure you are up to the task. This means setting aside time to manage your commercial properties. While most of this burden is placed on the tenant, you will still need to deal with tenant turnover and other duties that come along with owning property.
Once you’ve decided you’re ready to take the leap, you’ll need to search for the perfect NNN property. You can do so by browsing high-quality net lease investment properties online. When looking, you’ll want to keep the following tips in mind.
What to Look For in a Triple Net Lease For Sale
When you’re looking for any property, certain things will boost or tank your property value. Keep an eye out for these signs that a property is promising:
Physical and geographical location: Location is a key part of any piece of real estate. This means accessibility, proximity to anchor locations, and population demographics play a big role in determining a property’s investment potential.
Trust your tenant: A triple net lease can be a great investment, but only if your tenant is responsible and has a good credit score. Remember that you’ll be handing over administrative duties, so you need a tenant who pays rent and taxes on time. If there is already a tenant in place, be sure to investigate their history so you know they will abide by the lease terms and stick around for the long haul.
Assess the lease agreement: The value of your NNN property is in the lease. You’ll want to take a good look at the contract to ensure there is room to adjust rent with inflation. Also, check out the taxation burden. When you buy the property, taxes may jump, and you want to make sure your tenant will be able to pay the new amount. Know what you’re getting into before you sign the contract.
A triple net lease can be an excellent source of passive income when you know what to look for and how to invest properly. With these tips, you can perform your due diligence and make the wisest possible investment.
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