Looking to Buy NNN Properties? Here's Everything You Need to Know

Looking to Buy NNN Properties? Here's Everything You Need to Know

If you're familiar with real estate terms, you might have heard the word triple-net a few times or seen an ad on the internet about a NNN property for sale.

However, if you're a newbie who is curious about the NNN lease and would like to get enlightened about it, then you've come to the right place.

This article is a concise explanation of everything you need to know regarding triple-net and how to buy NNN properties. 

In the real estate world, a NNN property refers to a building operating a triple net lease. 

So What Exactly is a NNN Lease?

A triple-net or Net Net Net (NNN) lease is a type of commercial real estate rental agreement in which the tenant or lessee is responsible for most of the expenses associated with operating a property.

In an absolute triple-net rental policy, the tenant is usually responsible for all the expenditure the property incurs.

The expenses in the agreement usually include standard area maintenance fees, property taxes, and building insurance.

In addition to covering the operational charges, the occupant is also responsible for managing the daily affairs of the property. 

NNN leases are primarily found in retail establishments but are now becoming common in office and industrial buildings.

Pros and Cons of Purchasing NNN Properties

Pros and Cons of Purchasing NNN Properties

Although triple net properties are among the most attractive real estate investments, they also have their drawbacks. 

Here are some benefits and limitations of investing in or purchasing net lease properties for sale:

Pros

Cons

  • NNN properties offer a reliable and consistent income stream.

  • The rental agreement provides low risks to the property owners.

  • The owner enjoys tax benefits.

  • Landlords' responsibilities are minimal.

  • Some properties have the potential to build equity.

  •  The tenancy period is usually long.

  • With few legal obligations and duties, landlords can purchase properties anywhere.

  • When the tenancy period expires, finding new occupants can be tedious.

  • The tenant bears most of the risks and expenses.

  • The occupant doesn't enjoy the same income consistency as the landlord.

Securing Financing For a Triple-net Building

An individual looking to buy NNN properties might need to source additional financing due to the expensive nature of commercial buildings. 

One method of seeking financial assistance is by applying for a commercial real estate loan or mortgage. Commercial loans require many documents for financial institutions to determine whether the borrower will repay the loan.

Although the mortgage is for business purposes, the institution will require the borrower to provide personal information such as a valid driver's license, a social security number, and proof of address. 

Additionally, your business plan and financial records are also essential. Your business plan is necessary to reassure lenders that a strategy for spending the money is in place and projections for how you will generate profits.

Based on past employment, the relevant financial records that the institution may request often include present payroll information, bank records, self-employment tax information (if applicable), and documentation.

Also, when applying for loans, real estate files and the appraisal value will be required to demonstrate the property's value to the institution.

Borrowers must provide the original listing of the property and appraisal results if an appraisal has recently been completed. If you don't have one, you would need to get it for the mortgage. 

Finally, a property survey is necessary for a financial institution to approve the loan. A property survey delineates the boundaries of the property, the location, and any other physical feature that is significant.

Consider These Factors Before You Make Payment

Before making payment for a triple-net building, there are some essential factors you need to take into consideration. They include:

1. The Property's Location

When you intend to buy a triple-net commercial building, you need to put good thought into the geographical location. It could be a vital determinant of the establishment's success.

Purchasing or investing in a building situated in a secluded environment might make it difficult for potential customers to locate it. 

2. Your Budget Size

Acquiring a NNN property tends to be a capital-intensive endeavor, so you need to ensure that your budget is prepared. 

Commercial properties are usually expensive due to their sizes, location, resources, and other factors. 

3. A Realtor's Expertise

Before you buy NNN properties, it's usually advisable to seek professional opinion and assistance to avoid making mistakes. 

If you're a rookie in the real estate market, you can consider hiring a realtor to guide you through the process. 

4. The Type of Property

There are typically numerous business structures to choose from in the real estate market, each with its profit margin.

Sometimes, choosing a property can be challenging because numerous NNN buildings are constantly being offered for sale. 

You can try thinking of your intentions or passions regarding real estate buildings to help you decide on a suitable business. For instance, if you're a fan of early morning coffee and bagels, you can consider purchasing Starbucks NNN properties for sale. 

5. Management 

Another factor you need to mull over is your potential involvement in the property's operation. If you have a day job, then buying a triple-net property might be the way to go since it requires minimum involvement on your part. 

6. Future ROI

Obtaining a commercial structure necessitates a thorough examination of the property's ability to generate a return on investment.

To determine the potential profits and losses of purchasing a NNN property, you can consider using a real estate measuring tool such as the one percent rule.

Suppose you want to buy Walgreens NNN properties for sale. The 1% rule can give you an estimate of the potential profits you can accrue. 

7. Real Estate Laws

Another vital point to consider is the law or regulation associated with various properties you intend to purchase. 

Failing to adhere to real estate rules usually attract fines and penalties, so to avoid those, you'll need to familiarize yourself with all the presiding regulations in the locations that capture your interest.

Bottom line

Investing in NNN buildings has attractive benefits and risks, so to be on the safe side, you need to learn all the vital aspects regarding the transaction. 

It's essential to understand everything about triple-net leases before you buy NNN properties to avoid future problems.



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