When it comes to commercial real estate investments, you have a plethora of options. The sector is growing really fast, and choosing to invest in commercial properties is a wise decision. Nonetheless, there are various properties to invest in, and triple net investments are popular. They offer passive income opportunities and benefit investors in myriad ways.
NNN leases- What do they involve?
There are three main types of leases; these are single, double, and triple net leases. Triple net leases are pretty common and favorite among many investors. The tenant pays up all the property costs in this arrangement and still remits the agreed-upon amount of rent.
The expenses include rental estate taxes, insurance premiums, maintenance costs, and common area maintenance. There are multiple nnn lease property types, and many are commercial or retail properties. They range from restaurants, automotive, medical clinics, offices, dollar stores, and many more.
What should I consider when investing in triple net properties?
Investing in real estate is never easy, especially when you’re new. NNN properties aren’t an exception; you need lots of information and can make costly mistakes. It’s then vital to consider various aspects before making a purchase decision. Here are issues to address when investing in triple net properties;
1. What’s the future rental potential
No investor wants to stay with a vacant property, and this is a consideration worth making when investing. Although the current property location may seem reasonable, you need a better understanding of the location dynamics. Examine the previous rent analysis to determine the prospects of getting tenants. This way, you can be sure of high returns and steady income.
2. Think of the property location
Before investing, ensure that the property appeals to tenants due to the location and neighborhood. You may be seeking tenants with a good credit background, but you’ll miss out on potential tenants if you don’t choose the best location. The location also determines the rent rates. You’re likely to get higher returns when you acquire property in a strategic location.
3. Understand the market
Understand the marketplace; this helps a lot. It’s easy to market in a niche that you understand. Before investing, analyze the market in terms of;
- The demographics
- Potential traffic
- Population growth
- Growth potential in the area
With this information, it’ll be easy to choose properties with a high potential of value increases in the future.
4. Be keen on the lease structure
With triple net investments, the tenant caters to almost all the property expenses. However, this can bring about disagreements if the lease contract isn’t clear. The lease agreement must specify what the tenant handles and the rent rates.
In this case, let the tenant should know that they cater to the tax, insurance premiums, property maintenance, and repairs. The lease period should also be clearly stated, and the circumstances that allow for termination, if any. Also, have an attorney evaluate the liabilities for both parties.
Triple net properties are lucrative investments if you know how to go about the process. For excellent results, choose properties in strategic locations or areas with high growth potential. Also, state everything clearly on the lease agreement and strive to attract the right tenants.