What is a Net Leased Investment

Advantages of
Triple net lease (NNN)Properties

Investment grade triple net-lease (NNN) properties are a valuable and powerful addition to your 1031 exchange program or your investment Portfolio. Many investment advisors now recommend that investment grade triple net leases are included in well structured investment portfolios.
Note that if you use a properly structured 1031 exchange to acquire your triple net lease property, you may well be able to defer your capital gains taxes indefinitely.

Essentially, a single-tenant, net-leased investment gives you total (fee-simple) ownership of a free-standing, single-tenant commercial property, which is pre-leased to a high credit retail tenant – Walgreens, Jack in the Box, Wal-Mart or Best Buy, for example – on a long-term basis, providing you with a stable, long-term cash flow. In the case of a (NNN) net lease your tenant will be responsible for the operation, maintenance, taxes, repairs and improvements to the property.

To illustrate:
Walgreens is your tenant for a non-cancelable, 25-year period. The tenant is responsible for all costs to operate and maintain the property. In many cases, when the lease expires, you will own the property free and clear. This is sometimes referred to as a “care-free” or “absolute” Triple-Net lease. Triple-Net lease ownership is ideal for first-time real estate investors as well as for savvy veterans seeking to simplify their holdings by selling off management-intensive properties and trading into less complicated real estate holdings.

The price range for a Triple-Net lease property is generally between $500,000 and $7 million. The dollar stores and fast food restaurants are the most affordable, while drugstores are on the higher end. Big box retailers such as Home Depot, Lowe’s and Wal-Mart can bring from $15 million to $25 million. Because most investors borrow funds to acquire Triple- Net properties, it is essential for them to work with a qualified mortgage broker to find the best possible financing for the type of property being purchased. An analysis of factors such as the tenant’s credit, location, capitalization rates and loan terms is essential to determine the cash flow and security of a Triple- Net lease investment.The minimum down payment usually required by lenders is 20 percent to 25 percent for investment grade tenants and 25 percent to 40 percent for most other tenants.

With a Triple- Net lease, you generally own the building and the land, but ground leases, where you own the land only, also are popular. Our customers have come to depend on our experience for extensive value-added services, including educating them about the relative merits of alternative investments, analyzing cash flow and debt service, researching tenant credit and the merits of one location over another and much more.
Whether you are acquiring a ground lease or the more traditional Triple-Net lease investment, you will own a 100 percent, undivided interest in the property.

The advantages of owning a Triple-Net leased property… 

There are many excellent reasons to acquire an investment grade net-lease property for either a 1031 exchange or safe, dependable monthly income, including…

  • You can defer capital gains taxes through a 1031 tax-deferred exchange. .
  • NNN leases are either 100 percent management-free or require very little involvement from the landlord. .
  • Triple-Net lease property has high residual value and is a liquid investment. .
  • You can get non-recourse, fixed financing for more than 10 years with Triple-Net lease properties. .
  • There are no vacancy factors, tenant improvement costs, management fees or leasing fees.
  • Location! Location! Location! Properties are typically in prime retail areas with high traffic counts and great demographics.
  • You don’t have to worry about tenant turnover. Your tenants sign leases of 5 years to 25 years.