What are the Primary Reasons to Invest in Single Tenant Triple Net Lease (NNN) Property?
From a very young age I’ve been fascinated with real estate investing and I’ve been fortunate enough to have had the opportunity to purchase, manage or sell almost every real estate property type there is. Each property type contains its own pros and cons and I don’t believe there is a “one-size-fits-all” type out there. Ultimately, it all comes down to YOU. What are your investment goals and objectives? How much money do you have to invest? How long do you plan on investing? What is your risk tolerance? Etc.
Single Tenant NNN Lease property (sometimes called Triple Net or Net Net Net), however is the closest “one-size-fits-all” real estate investment type that there is. I wish every household in America owned a single tenant triple net leased property.
The purpose of this article is to share with you some of the primary reasons you should consider single tenant NNN leased property as part of your investment portfolio.
Top Reasons to Invest in Single Tenant NNN Leased Property:
PASSIVE INCOME: Single Tenant NNN Properties provide passive income. Passive income is income that is generated on your behalf without any active involvement on your part. Passive income differs from active income in that active income requires you to be actively involved before you receive any income. The most common example of active income is a person’s employment – if you do the work, you get paid. Active income requires consistent time and attention. On the other hand, passive income allows you to be located anywhere in the world doing whatever you want with your time and the income will still be there for you.
Real estate is a popular investment option (and this author’s biased form of investment choice), but one of the complaints about real estate is the involvement it takes. Maintenance issues, management headaches, leasing concerns and collection challenges are frustrating, time consuming, costly and require expertise. Yes, you can hire a property management company to address some of these problems, but management fees eat into your profits and while you may not be involved in the day-to-day issues of the property, you’re still heavily involved in the oversight, operations and decisions of the property and that’s only IF you have a really good property manager. Real estate can be very involved.
Single tenant triple net lease properties are the best investment avenue for passive income in real estate. For absolute triple net leases, the TENANT is responsible for all repairs and maintenance. The TENANT is responsible for the structural components of the building. The TENANT is responsible for the roof, parking lot and heating and air conditioning systems. The TENANT is responsible for all operating expenses of the property including property taxes and insurance. Property management companies are completely unnecessary. The tenant sends you the monthly check and you make the deposit – that’s it. Single tenant triple net leases are truly passive income investments.
REAL ESTATE BENEFITS: Single tenant NNN properties have all of the traditional benefits of other real estate assets. Among other things, these benefits include: a) the many tax advantages available to real estate owners b) appreciation potential c) an asset that is income producing d) owning a tangible asset you can see, touch and visit e) security – real estate is one of the three basic needs (the other two being food and clothing) f) diversification and g) the opportunity to leverage your money and thus increase your rate of return.
STABILITY: single tenant NNN properties are typically very stable assets. These properties tend to have long-term leases. They are usually very visible properties and prominently located within the primary shopping areas with a lot of foot or vehicle traffic and often in front of large, “anchor type” tenants such as Walmart, Home Depot, or Costco. The leases are commonly signed by regional or national tenants with a large brand following and have the backing and guaranty of multi-billion dollar companies. In many cases, the tenants that occupy single tenant NNN properties are not impacted by e-commerce competition and may even thrive during a recession.
AVAILABLE FINANCING: Lenders love single tenant NNN property for many of the same reasons you do. It’s an asset type they are familiar with. It usually involves a tenant they know and understand. They like the stability of the asset. As a result, financing is generally available for this type of property. Even if you don’t obtain financing when you purchase, you’ll want the peace of mind in knowing a future buyer will have the opportunity to secure financing when the time comes for you to sell.
Conclusion
Single tenant triple net lease properties work well for the old and the young. They are great for anyone who wants a low risk, hassle free property with a lot of benefits. They provide a fantastic source of passive or retirement income. They make perfect 1031 exchange replacement properties. Single tenant NNN investments are an excellent choice for inclusion in your investment portfolio.
For more information about single tenant NNN lease properties, visit the NNN Resource Center.
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