Triple Net Properties

Calkain focuses solely on the net lease market, offering to help broker the buying and selling of triple net properties (also referred to as NNN properties).  Triple net properties are a niche market in the grand scheme of commercial real estate that offer unique advantages to investors.  We’d like to discuss those advantages, but best to firs start with a basic understanding of what makes a property a net lease property, or a triple net property.

Typically, when talking about a triple net property, it’s referring to the lease structure.  A triple net lease is a lease in which the tenant (or occupant of the building) is responsible for paying all of the operating expenses associated with a property.  It is considered a “turnkey” investment as the owner is not responsible for paying any of the operating expenses.  These triple net (NNN) deals are typically free standing buildings with a single tenant (although can have 2 or more tenants), with long-term leases in place.  They tend to be stable, brand name tenants that have stable financials.

When looking for triple net properties, they are often lumped together with double net (NN) properties – in which case some of the expenses get shifted back to the owner.  Typically in this case, it’s either the roof structure, or some other expense like insurance or maintenance.  Just make sure as you explore the triple net property listing sites, that you are able to identify triple or double net deal structures – it makes a big difference in the end with the amount of time required to “manage” your investment.

So why is this type of asset popular for investors?  Triple net properties offer several advantages, five of which are outlined below:

  • Reliable Source of Income – Net lease assets tend to have long term leases with predictable cash flow
  • No Management Hassles – Avoid management obligations and shift the burden to the tenant
  • Tax Deferment – 1031 Exchanges allow you to defer 100% of your capital gains tax
  • Stable Investment Holds Value – Long term tenants decrease your risk while your property can appreciate and regular rent bumps help protect you against inflation
  • Flexibility – Assets can meet individual goals, that of your partners or large institutions

Financial markets can be unpredictable, which may lead to major losses. While the Trump administration remains unclear, triple net lease investments can help avoid losses and keep capital intact through all the uncertainty.  Even with the historical low cap rates we’ve all been talking about for the last few years, the average net lease cap rate is still around 6.25%, well over four basis points above the US Treasury rates.  In addition, the national commercial real estate market is anticipated to grow further, with continued demand for net lease investment in 2017.

So by now, you can see why the net lease market is attracting all sorts of interest, from individual buyers to institutions.  Calkain can help you explore triple net properties and identify the best match to achieve your investment goals.  Give us a call today at 703.787.4714.

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