One amazing aspect of investing in NNN triple net lease properties is the low ticket for entry. For as little as $1.5 million, investors can own a property tenanted by a nationally recognized brand and get reliable and passive monthly income for as long as 15-25 years.
However, triple net lease investment properties with lower price points are not easy to find, and they usually have short-term leases and may include a lot of deferred maintenance. New NNN investors should also note that high-cap rate, low-price lease properties are riskier purchases than higher priced properties. It follows therefore, that it is also more challenging to finance lower priced properties. On the flip side, when investors factor in financing, tax write offs and lease rent escalations over a 12 to 20 year NNN lease term, an advertised 5.00% cap rate can easily translate to a 7.5–11% compound annual rate of return!
When using debt to buy a triple net lease property, investors must have a minimum of $1.0 million in net worth and have cash on hand ready for a down payment of up to 40%. The amount of financeable debt mostly depends on tenant credit, as well as location, lease term, etc. The better the net lease tenant’s S&P credit rating, the higher the amount of borrowing that is possible for investors. Investors aiming for lower NNN asset prices should look at:
- C-stores/gas stations ($1.0–2.0 million)
- Medical brands, such as dentists, dialysis or urgent care stores ($2.0 million)
- Quick service restaurants such as Burger King, Wendys, Chicfilet, etc ($1.5 million and up)
When evaluating a triple net lease investment here are some key factors NNN investors must deliberate:
- Will rent receipts cover debt service?
- The length of lease term best tailored to debt payoff?
- What and how much tax and depreciation write offs are required?
- Will another property be exchanged using IRS section 1031?
Broker Robert Gamzeh and his team are multi-decade experts at finding NNN properties in price ranges $1.0 million and up. The team uses its extensive technology and broker networks to identify possible investment triple net lease properties that will best meet your investment, tax, lifestyle and 1031 criteria. Call 202-365-3050 for a free consultation.