By Kathleen Silver, Associate VP of Sales and Operations
Why do real estate investors buy STNL properties?
Investment grade triple net-lease (NNN) properties are a valuable and powerful addition to an investor’s portfolio.
A single-tenant, net-leased investment gives total (fee-simple) ownership of a freestanding, single-tenant commercial property, which is pre-leased to a high credit retail tenant (Ex: Walgreens, Jack in the Box, Walmart or Best Buy, all on long-term leases, providing a stable and predictable, long-term cash flow.) In the case of a NNN lease, the tenant is responsible for the maintenance, taxes, and insurance to the property.
Example: An investor buys a Walgreens in San Francisco, CA (there’s a ton of them!). The lease purchased with the property is for a non-cancelable, 25-year period. The tenant is responsible for all costs to operate and maintain the property (including property taxes). In many cases, when the lease expires, the property owner owns the property free and clear. This is sometimes referred to as a “care-free” or “absolute” NNN lease.
Who Should Buy a NNN Lease Asset?
NNN 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-intensive properties and trading into less complicated real estate holdings.
The price range for a NNN lease property varies depending upon the lease length, quality of tenant, and location. Dollar stores and fast food restaurants are typically more affordable, while drugstores can be valued in the tens of millions. Because most investors borrow funds to acquire their NNN property, it is essential to work with a qualified mortgage broker to acquire the best possible financing. The minimum down payment typically required by lenders is 20-25% for investment grade tenants and 25-40% for most other tenants.
Advantages of Owning a NNN Leased Property
- Capital gains deferment of taxes through a 1031 tax-deferred exchange
- Either 100% management-free or require very little involvement from the landlord/owner
- High residual value and a liquid investment
- Can obtain non-recourse, fixed financing for more than 10 years with NNN lease properties
- There are little to no vacancy factors, tenant improvement costs, management fees or leasing fees
- Location! Location! Location! Many are in prime retail areas with high traffic counts and great demographics
- Tenants sign leases of 5 years to 25 years
Why Would a Commercial Investment Advisor Want to Exclusively Sell NNN Lease Properties?
NNN properties allow a real estate agent/broker to engage in many benefits that are not commonly seen with other property types:
- NNN advisors with NAI Northern California have a database filled with leads nationally – not just regionally. Easily do deals in other states.
- NNN lease investments are fairly easy to understand, which will allow a new, more green agent to learn the product type quickly.
- Since NNN properties are one of the most highly sought after property types, you will find that a “clean” deal, accurately priced will have no lack of buyers. Most of the time, you will get all cash offers with short due diligence timelines.
Our NNN Team is lead by Sr. Investment Associate, Chris Lomuto and Investment Associate, Milo Spector. Their team maintains direct outreach to thousands of property owners of NNN assets nationally. NAI Northern California is a member of a 6,700 associate 375 global office network of advisors. Our NNN team is highly connected to the national NNN lease market.
To be a part of this team means you will have the training, technology platform with leads ready to go and marketing support to provide you the shortest runway to success. Please visit our LinkedIn company page to follow us!