Triple Net Investments

Why triple net? Here are the benefits associated with a NNN lease.

Why Triple Net?

NNN leases are longer in length than a typical residential lease, providing long-term security and potentially lowering the risk of vacancies.

Since the tenant pays all of their own expenses, cash flow can reliably be predicted. Tenant usage will not affect net operating income.

NNN leases are one of the most solid and best-producing Investments in Real Estate. This is due to the combination of long-term tenants with strong financials and the tenant covering the Investor‘s expenses associated with the daily operations of the business.

There are many market factors associated with Commercial Real Estate that require a Top-Tier Agent to represent you as the client. Because Phoenix is moving so quickly, it is imperative to have a Broker who is involved with the inner-circle of Real Estate Professionals as well as owners and tenants. Gerchick Real Estate is involved in the Phoenix market every day and we are constantly evaluating new opportunities as they arrive on the market, evaluating the financial background of the tenants in order to provide a complete analysis for our Investors.

As Triple Net Investment (NNN) specialists, Gerchick Real Estate can work with high-level investors desiring high returns and added security.

A NNN is a common type of lease in Commercial Real Estate. In a NNN, the tenant is responsible for the owner‘s expenses such as Property Taxes, Maintenance and Insurance. This is above and beyond the rent per square foot being charged by the owner.

Key Points of Interest

Risks associated with a NNN lease

The risks of NNN leases are based on the tenant credit. A company rated a great credit rating will have a lower default rate than a company with a lower credit rating. A company with a AAA credit rating is lower risk and will thus sell for a lower cap rate than a lease backed by a company with a BBB credit rating.

Owning a specialized building can be a risk, especially in a bad location, as the building might need to be improved to attract more potential tenants during a period of vacancy.

Investment requirements for a NNN lease

NNN’s typically start as low as $800,000 and continue into the millions. Due to the fact that commercial financing can be utilized, which typically requires thirty percent down, we can investigate a NNN investment with as little as $240,000 cash investment.

Common Triple Net Businesses and Building Types

The most common NNN buildings are retail and restaurants. Almost every retail center could be considered a possibility in addition to large department stores and grocery stores. Single tenant free-standing buildings such as banks or fast food restaurants are often NNN investments. Office and especially medical offices can also be potential NNN investments… whatever your interest, Team Gerchick can help you.

The less expensive investments will typically be smaller businesses which want to reinvest their capital in themselves rather than in real estate.

More money buys higher end tenants, including national credit tenants, in which case, the lease would be guaranteed by the corporation. Burger King, Albertson‘s, Wal-Mart or Starbucks would all be examples of national credit tenants.

What steps are needed to get started?

When you contact Gerchick Real Estate, we will discuss the size of the investment that is appropriate. Then we will determine your comfort level with different types of businesses.

There are several ways to view this type of investment, from area speculation to solid cash-flow with long-term, stable tenants.

After we look at several properties on the market we will narrow down an exact model and we will identify 3-5 properties for an in-depth analysis.

Can NNN’s be utilized in a 1031 exchange?

Absolutely!

How long does the process take until closing?

There are many more areas which require close scrutiny when investing in commercial real estate. Therefore we prefer to allow at least 30 days to identify a short list and an additional 75 days for escrow. This is important for clients wishing to utilize a 1031 exchange.

Gerchick Real Estate can provide the highest level of service available to any size investor in the NNN market. We welcome the opportunity to show you what we can do!

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