Before investing in net leased properties for sale, you have to know about the types of property. Generally, triple and double net leases are the most common.
Single net lease (N)
The tenant is responsible for both base rent and property taxes.
Double net lease (NN)
In a double net lease, also known as NN, the tenant bears the cost of building insurance and property tax. Other costs like common area maintenance and structural repairs are the lessor’s responsibility. “Roof and structure” is a reserved amount, to be paid by the tenant.
Triple net lease (NNN)
In a NNN arrangement, the tenant has to pay for almost all the expenses. He has to bear the costs of any repair or maintenance as well. This type of lease is commonly seen in commercial freestanding buildings.
Bondable lease (Absolute NNN)
This is also known as an absolute triple net lease, hell-or-high-water lease, and true triple net lease. In case of a bondable lease, the tenant is bound to carry every possible risk related to the real estate. The tenant can under no circumstances terminate the lease term.
Without any doubt, NNN leases are equity investments. The investor is obliged to finance a handsome amount of the purchase price. The property is subject to sale after building up equity.
Things to Consider Before Investing in Net Leased Properties for Sale
- Market Feasibility
Are you aware of the supply and demand chain in a particular area? Will it be feasible to invest there?
Location primarily decides whether you are investing in the right place. It is more important than getting the ideal tenant. If your property is located in a dull area, you may find it hard to get another tenant when the present one is gone.
- Financial Feasibility
Will you be able to make enough profit for the risk you are taking? Thoroughly scrutinize every detail before you invest in net leased properties for sale.