Are Net Lease Properties safe?

Investing in any sector can be risky. However Net Lease Properties are considered by many Investors to be one of the least risky of all commercial real estate investments. Net Lease properties usually do not involve tenant turn-over and are generally long-term leases. Also many net lease properties deal with Credit Tenants which are considered investment grade.

Who can invest in Net Lease Properties?

Many People think that Triple Net Lease Properties are only purchased by Large Companies to expand their business prospects. That is no longer the case on Net Lease Investments. High net worth individuals can consider making investments in Net Lease Properties as these investments could maximize their returns. Some of the Commercial Loan programs we have access to can get an investor to acquire a Single Tenant Net Lease Property with a Credit Tenant. In some cases this could be possible with only 10%-20% down from the Investor. Net Leased Properties are very attractive to investors who need to do a 1031 tax-deferred exchange.

What is a Net Lease?

A net lease requires the tenant of a property to bear many of the costs associated with the property. Depending on the terms of the Lease these costs could include real estate taxes, maintenance, utilities and insurance. A Net Lease is very attractive for the Property Owner as it eliminates sudden Landlord expenses that crop up with typical commercial properties. This in turn makes the Landlord’s income stream fixed with little to no landlord responsibilities.

What is a Single net lease?

A single net lease is sometimes shortened to Net or N. The lessee or tenant is responsible for paying property taxes as well as the base rent.

What is a Double net lease?

In a double net lease (Net-Net or NN) the lessee or tenant is responsible for real estate taxes and building insurance. The lessor or landlord is responsible for any expenses incurred for structural repairs and common area maintenance. “Roof and structure” is sometimes calculated as a reserve, on these types of Net Lease Properties.

What is a Triple net lease?

A triple net lease (Net-Net-Net or NNN) is a lease agreement on a property where the tenant or lessee agrees to pay all real estate taxes, building insurance, and maintenance (the three ‘Nets’) on the property in addition to any normal fees that are expected under the agreement (rent, etc.). In such a lease, the tenant or lessee is responsible for all costs associated with the repair and maintenance of any common area of that particular Net Lease Property.

What is an Absolute Triple Net Lease (Bond Lease)

An Absolute Triple-Net lease is a net lease whereas the tenant agrees to pay monthly base rent as well as all of the operating expenses associated with the property such as the property taxes, the property insurance, and all maintenance and repairs without any limitations. Under an absolute triple net lease structure, there are no legal defenses for a tenant if they fail to meet their responsibilities, and the tenant is still financially responsible for unforeseen events such as eminent domain proceedings, or if the property is damaged by fire, vandalism, or some other casualty.

What type of Tenants are signed to lease Net Lease Properties?

Pharmacy & Drug Store Companies such as Walgreen’s and CVS are Tenants for Net Leased Properties. Also many quick service restaurants (fast food) like Burger King, McDonald’s and Wendy’s are leasing property.

Are Net Lease Properties freestanding buildings?

Some Net Lease Properties are Retail Shopping Centers. Many Grocery Store Chains fall into this category. Publix, Kroger and some Department Stores also are attached in a Retail Shopping Center. Other Net Lease Properties are freestanding buildings such as many Walgreen’s, CVS, Burger King, Taco Bell or McDonald’s.

What is a Ground Lease?

A Ground Lease is generally a long-term lease of land in which the tenant is allowed to occupy and develop the land during the lease period. After the lease expires, the land with all improvements, buildings and other structures will be restored to the owner. Ground leases are typically long term Net Leases where the tenant pays all expenses except debt service. Some investors prefer ground leases because they don’t need to use their own capital to build and improvement the commercial property, yet the Investor ends up owning the improvements on termination of the lease. Many Tenants prefer ground leases because a ground lease can reduce the tenant’s cost of development by eliminating land acquisition costs.

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