Commercial Real Estate Investing can be one of the most profitable and safe investment mediums available for those who know what they are doing. It can also be fraught with perils and expenses that can be very unsettling for a new investor who does not understand the intricacies of the market. Most Commercial Real Estate investments are very hands on investments that require constant work, attention and maintenance to maintain the value of the investments. Whether it’s a Multifamily Apartment Complex, an Office Building, a Hotel or a Retail Shopping Center, all of these asset types share one thing in common, a lot of work and a lot of risk! For those who buy low and sell high, these types of deals can be some of the profitable investments on the planet.
Let’s get away from risk however. What if you could find a safe, stable, very profitable and long term investment medium that avoids almost all of the risk and headache typically associated with owning these assets while never having to worry about the property or collecting your rent on time? Welcome to the world of Net Leased Properties, also referred to as Triple Net or NNN Properties.
What is a net leased property?
A net leased property is typically a free standing building with a credit worthy tenant such as CVS, Walgreens, Starbucks, McDonalds, Bank of America, Dollar General, AutoZone etc. who are on a long term corporate lease of usually 10-20 years plus options to extend the lease out for up to another 10-50 years. Because of a desire to maintain liquidity, most of these companies do not actually buy the buildings they occupy, rather they lease them and in doing so, sign a corporate guarantee insuring that the tenant cannot just walk away from a lease if they no longer like the property. On top of that, the tenant is responsible for often complete and total maintenance and care for the property, the building and everything associated with it.
What does this mean to you as an investor?
This means that an investor can have a safe, stable, long term and highly profitable investment that is backed by the strongest companies in the United States and abroad. In other words, the investor receives a check on time every month and just about never has to worry about the condition their property is in… because the tenant does all the work!
What kind of return can a client get for their money?
The average rate of return on assets such as these can range anywhere from around 4.5% and up to 8% or higher. But wait, it gets better! These tenants have increases in rent either annually or every 5 years which means that an investors income goes up every time the rent goes up. When you take into account the present low interest rate, through leverage, i.e. a mortgage, an investor can boost their return even higher up to 10% or greater. So… you have a safe, long term, credit worthy investment that makes you more money the longer you own it with little to no upkeep or maintenance required on your part. This is what retirement is supposed to be!
Who are these investments ideal for?
First time investors, passive investors, retirees and companies looking to ensure long term economic viability while minimizing risk. These are excellent investments for those looking to simplify their life while still owning significant real estate and receiving a high rate of return on their money. There are also many large companies such as Prudential, Blackstone, Acadia Realty, Cole Real Estate Investments, Inland, Equity One, General Growth Properties and JP Morgan who utilize Single Tenant Net Lease properties as a significant part of their investment strategies and these are multibillion dollar companies.