Imagine getting a monthly check without any responsibilities for the next two decades. Now visualize that check being written by a multibillion-dollar company like McDonald’s, Dollar General, or Walgreens.
A corporate triple-net (NNN) property carries a 10 to 20-year rent agreement, under which the occupant is responsible for all tax payments, insurance, and common area maintenance costs.
Businesses choose NNN leases for many reasons, brand uniformity being one of them. When you see a McDonald’s or a Wendy’s, without sighting their signboard; you can recognize their brand based on certain architectural features.
Corporate NNN properties for sale typically comprise fast food and restaurant buildings, retail stores, warehouses, auto parts stores, gas stations, pharmacies, and similar outlets.
When acquiring any long-term lease commercial property, you’ll want to be careful to choose one with strong investment potential.
The purchasing procedure can be complicated, so consider hiring a familiar personal representative who understands your objectives and business ideas.
As an owner of triple-net business property, a rent agreement with a credible tenant comes with many benefits. Such an arrangement is beneficial because:
1. It’s a Reliable and Passive Income Stream
When you own a corporate property or invest in one, you’ll benefit from a NNN absolute lease, because it provides a steady stream of profits, without you having to put in any work.
This form of agreement is set up so that the occupant pays a stipulated amount as rent to you every month, for a specified period of time.
Whether you set a flat rent or a fixed increase rate for the monthly hire fee, there will always be money coming into your pocket.
If your building is being occupied by a corporate giant like Walgreens for instance, you can also consider using your income from it as a retirement plan.
The terms of the rental contract can also be renegotiated and modified, resulting in consistent income for many years.
2. It’s a Low-risk Investment
NNN leases are regarded as one of the safest investment options available.
Triple-net rental policies usually exempt landlords from most of the hazards associated with operating commercial establishments.
The NNN rental agreement requires the occupant to cover all property costs, including real estate taxes, repairs, and building insurance, in addition to the rent and utilities.
As a corporate real estate owner with an absolute triple-net policy, all you’ll do is receive rent checks, while your occupant takes care of everything else.
3. Landlord Responsibilities are Minimal
The owner of commercial property for lease doesn’t need to play an active role in the daily running or management of the building.
Once a tenant signs a contract to rent your corporate property, he or she automatically assumes the role of manager and caretaker of the building and is responsible for all the operational expenses.
Occupants do not have to wait weeks for a landlord who is overburdened with property repairs. They run all their affairs independently.
While organization owners benefit from the simplicity and lack of financial commitment, tenants benefit from the sense of control provided by this business model.
Since your leaseholder takes care of all the taxes, you get to enjoy tax breaks.
Having few responsibilities leaves you with a reduced workload and if you have other assets to manage or work a full-time job, this arrangement can be extremely helpful.
4. Long-term Tenancy is Guaranteed
The period of occupancy for a corporate real estate building is usually longer than that of a long-term lease apartment.
While the average commercial rental agreement can last three to five years, a triple-net contract can last up to twenty-five years or more.
Getting a longer lease period helps you because there is less turnover to deal with and less opportunities for vacancies.
In real estate, turnover refers to the number of tenants who leave a property at the end of each contract term.
Having to source for new occupants frequently can be tasking for you as a property owner, so having an establishment with a triple-net policy helps to ensure that your leaseholder stays put for very long.
5. High Possibility of Gaining Equity
NNN real estate buildings are sometimes added to investment portfolios, as low-risk, conservative ways to build equity.
Equity simply refers to the value that would be returned to an organization’s owner(s), if all of the company’s assets are liquidated and all its debts are paid off.
Commercial properties benefit from quick and smooth equity growth, which boosts returns that are proportional to the property’s value.
As a landlord, you can consider selling your property when the market reaches a peak, if the population increases, or if you’re ready to invest the proceeds in a new venture.
Additionally, you have the option to offer your corporate NNN properties for sale, even if there are tenants with leases on them.
In this scenario, the rental agreement usually transfers to the new landlord, with the same terms.
The occupant is not required to vacate the premises prior to or after the sale.
All terms of the previous owner must be followed by the new landlord, who gets to benefit from the income the real estate will generate.
A triple net lease business avails you time to run other projects or jobs while guaranteeing you a paycheck at the end of each month. Your triple-net property can also serve as a possible retirement payment plan.
The rental policy exposes you to minimize risk. Since you’re not directly involved in the daily operations of the organization, you don’t suffer any occupational hazards that may occur.
Also, as the landlord, your responsibilities are typically few. Under an absolute triple-net policy, you owe your tenants no legal obligation whatsoever.
You don’t have to worry about placing vacancy ads on your property frequently, as one of the features of the NNN lease is long-term occupancy.
Additionally, business real estate has the potential to build equity. If you sell your assets at a favorable time period, you stand a chance to get a high turnover.
To sum up, remember to seek legal advice before acquiring a triple-net property, as the procedure can be tricky to handle alone.
To check out the latest corporate NNN properties for sale, click here.