Four reasons to consider investing in NNN retail properties.
Economic issues, such as dipping oil prices, have had a negative impact on many commercial asset classes. However, the net leased investment arena has continued to thrive. Investors are aggressively chasing yield, and there are options abound for single tenant retail properties that offer attractive returns. Cap rates have continued to compress for quality assets, but when compared to other investment options such as multi-family/office properties, the stock market, or government bonds, acquiring a management-free single tenant net leased (STNL) investment property offering a return of 6% or better is very intriguing. Here are some key reasons to consider a NNN retail asset for your next investment.
Management and hassle free income of NNN Retail Properties
Single tenant absolute NNN leased properties offer an amazing passive income vehicle. Acquiring a well-located asset with a credit tenant that has a long-term lease in place is a very secure investment. Rental payments roll in every month like clockwork (often via direct deposit), and the tenant is responsible for all expenses, including property taxes, insurance, and maintenance. Your only role as the owner is to collect rent and enjoy the return on investment. Most leases have built in rental escalations to combat inflation and renewal options to prevent lengthy negotiations when the term is nearing expiration. Net leased investment properties are a great way to avoid the management intensive requirements of multi-family, office or single-family residential assets, and the stress associated with a fluctuating stock market.
Flexible price points
Acquiring an apartment complex or office building can require significant capital, often $10 million or more for core assets. Single tenant retail properties also can be priced in that range for larger deals, but there are an abundance of options from $500,000 – $2 million for investors who prefer to diversify amongst several properties instead of putting all of their eggs in one basket.
Readily available financing for Net Leased Investments
If additional capital is required to fund a STNL investment, lenders currently are offering very attractive financing packages with historically low interest rates. Assuming a reasonable loan-to-value (LTV) ratio, lenders are able to approve loans with relative ease for single tenant assets that are secured by a long-term lease with a quality tenant. The low level of risk associated with this type of asset enables an investor to place debt on a significant portion of the purchase price, while still achieving an attractive return.
Pride of ownership
Retail is a driving force of the U.S. economy. Owning a single tenant asset leased to a successful tenant is a very gratifying experience. Watching your tenant’s business grow and flourish within the community creates a sense of pride that can’t be accomplished with many other investment opportunities. A retail asset provides goods directly to the consumer, so the impact of various tenants on the local economy can be tracked with relative ease.
If you are considering the addition of a STNL property to your investment portfolio, contact the team at HighStreet Net Lease Group for personalized guidance from one of our expert brokers.