Friday, March 29

How to invest in real estate and increase cash flow with NNN Properties


One of the reasons the real estate industry is such a profitable market is the diversity of options available. Investors can choose from different real estate asset classes and leases, depending on their strategy, budget, and property management preferences.

That said, the triple network (NNN) Leasing is one of the preferred types of contractual agreements in investment property. NNN properties are typically less demanding to manage and generate more stable income than other types of real estate leases.

If you are considering diving into real estate and you are not sure if an NNN lease is the best rental agreement for your property, we have prepared this guide for you.

This article will discuss how a triple net lease works and how to increase cash flow with NNN properties.

What is a triple net lease?

Triple net leases are real estate rental agreements that require the tenant to handle the operating costs of the building, such as maintenance and repairs, property taxes, and insurance.

On the other hand, the landlord only receives the base rent at the end of each month. NNN investment properties used to be more common in commercial real estate; however, they are also fast becoming a preference for industrial real estate investors.

Why are NNN leases more preferable among investors?

NNN leases come with minimal management responsibilities. Since the tenant handles all of the building’s operating costs, it means the landlord doesn’t go through the unnecessary hassle of running to pay the bills.

This element is often missing from other types of real estate leases, where the property owner handles at least one of the operating costs, such as taxes or insurance. Triple net leases are also long-term contractual agreements and can last up to 25 years.

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As such, you won’t find yourself looking for a tenant every few years. Additionally, NNN leases provide owners with a reliable stream of income. Throughout the tenure of the lease, the landlord receives a fixed monthly rate from the tenant as base rent.

Unlike other rental agreements, owners of NNN leases do not have to spend any part of the rent on operating costs, as the tenant bears that responsibility. There are also possibilities for a periodic percentage increase in base rent on long-term NNN lease investments.

Are there potential drawbacks?

While there are a number of reasons to buy triple-net properties for sale, there are a few downsides you should consider before making your move.

For example, NNN commercial properties come with income limits, which means there is a cap on the amount you can receive as a base rent. Although you can negotiate percentage increases with the tenant in the rental agreement, any rate you agree to cannot exceed the limit.

This factor probably has the biggest influence on your potential cash flow with NNN properties. Also, it can be challenging to find a new occupant for a triple net lease property.

Most tenants are often reluctant to take responsibility for a building’s operating costs; As such, you may not easily find someone to occupy your property.

Reinvestment costs on NNN leases are another drawback. NNN leases are long-term contractual agreements and some tenants may not pay attention to building maintenance during their stay.

As a result, you may end up spending a fortune fixing up the building for a new tenant once it’s vacant.

How to invest in NNN lease properties

You can increase your cash flow with NNN properties. However, like any other type of investment, you need to know the proper steps to take before diving into the market. Briefly, here is our guide on how to invest in NNN leasing properties:

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Hire a Triple Net Leasing Consultant

Due diligence is a crucial step in every investment move. Before purchasing NNN properties from a real estate company, such as BuyNNNProperties.comyou will need a professional to guide you through the process.

A triple net lease advisor is a real estate agent with experience in NNN leases. In general, an NNN broker can help you find the ideal property, analyze the investment and help you close the deal.

However, don’t hire just any NNN leasing consultant you see; Be sure to interview potential candidates and pay attention to the experience and market knowledge they bring. It would also be helpful if you work with an experienced real estate agent in different US cities.

Determine your tenant criteria

Tenants are possibly the most crucial factor in triple net leases, and low-end tenants could ruin your investment.

Giving your property to a squatter who doesn’t pay attention to maintenance or ignores paying your utilities could mean you’ll be faced with the arduous task of fixing these problems when they move out. Worse yet, they may not even pay their rent.

As such, you need to define the requirements for the type of tenants you want and do your due diligence on those who show an interest in the property to ensure they meet your criteria.

When interviewing tenants, some of the factors to look out for include credit rating, financial stability, type of business, and number of business locations.

Determine the returns on your investment

Triple net lease properties come with different cap ratesdepending on several factors, such as the years remaining on the lease, the type of tenant, and the location of the property.

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However, you need to determine the ROI that works for you and stick with it. Don’t go beyond your cap rate because you’ve been having trouble finding a suitable investment for a while.

The real estate market is vast, and with a little market research and the right professional help, you can find an investment that’s right for you.

Perform due diligence on the property

After finding a NNN rental property, you will still need to do your due diligence to make sure everything is in order. Visiting the property physically is the first step to take. If you are out of state, you can hire a property inspector to look at the property and prepare a report for you.

However, if traveling to the location is convenient for you, it is the best option. After viewing the property, they will also review the existing lease agreement. Review the lease with your NNN Leasing Consultant and hire an attorney to review the document.

The lease of the property determines your yields, so you must take it seriously.

conclusion

NNN Leases are an ideal option if you are looking for a real estate investment with minimal risk and liability. They also promise you a stable long-term source of income.

Of course, there are downsides, but the benefits outweigh them. Plus, with the right strategy, you may not have to deal with any of the drawbacks of NNN rental properties.


www.stephilareine.com

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