Buying a triple net property serves as a perfect investment option for investors that seek a passive income stream. Whether you’re new to buying commercial real estate investments or a seasoned investor, triple net properties are a perfect way to earn passive income.
An NNN or triple net lease is a lease agreement where the tenant pays for all the building’s operating expenses, including real estate taxes, insurance, and maintenance, besides the rental and utilities fee.
Triple net lease rents are usually lower than a standard lease because the renter handles more ongoing expenses on the property. Buying triple net properties like Wendy’s real estate for sale is beneficial for both the investor and the tenant for many reasons.
Renters benefit from NNN leases because it allows them to customize their space without spending heavily on buying the property. For investors, triple net leases will enable them to enjoy a reliable income source with a reduced or nonexistent property management role and few overhead costs.
Whether you’re a new investor or a seasoned hand, the following are things to consider when buying Wendy’s real estate for sale.
Building’s Form and Its Location
Regarded as the most crucial consideration when buying a triple net property such as Wendy’s real estate, location plays a vital role, especially when thinking of a long-term lease.
The NNN property you buy needs to attract other tenants when the lease terminates, or your present renter packs out. Consider finding an NNN property that’s located near a busy street so people can easily see it.
It’d be best also to check the building’s make-up and form. If the property is too specialized, it might be challenging and costlier to lease it out when the current tenant leaves.
For instance, a brewery occupied property with fermentation tanks, bottling, and kegging machines will require some transformation before another tenant from a different industry can use the building.
Term of the Lease
Before buying an NNN lease such as a restaurant property for sale, ensure you ask about the remaining lease. After all, the main aim of buying triple net properties is to generate regular passive income from the lease.
Buying a property with a short lease means you’ll experience a reduced income stream. Thus, you’ll need to buy an NNN property with a longer lease term remaining, maybe from ten years and above.
Nevertheless, if you prefer an NNN property because it’s a long-term investment, but the remaining lease term is short, then consider asking for a price reduction while buying the property to enable you to manage the cost of re-leasing the property.
The Tenant’s Creditworthiness
One major factor to consider when buying Wendy’s real estate is the tenant’s creditworthiness. The primary purpose of purchasing an NNN property is to have a steady income stream from the lease.
A creditworthy tenant like Wendy’s is highly likely to make rent payments on time, ensuring the property’s regular income. Naturally, publicly traded companies are often creditworthy tenants compared to private businesses.
However, publicly traded businesses are also susceptible to market conditions and might close many of their locations during an economic downturn.
Before signing the papers, ensure the property seller provides the tenant’s financial information like financial statements in their possession. That way, you’ll know the economic and financial capacity of the tenant.
Recognizable Brands and Companies
It’d be best to invest in triple net properties with recognizable companies and brands with long-term leases, especially those running franchise businesses. Recognizable and established brands attract more consumers, ensuring the property investment’s success.
Thus, it’d be best to choose triple net properties with renters that provide essential services and products like Wendy’s, which always stand even during recessions. You wouldn’t want a tenant that will quit due to bankruptcy issues.
True Absolute Net Lease
The most crucial thing to check when buying a Wendy’s restaurant for sale is that the lease term is genuinely an absolute net lease seeing as the property will be a passive investment tool.
The lease should stipulate that the tenant will pay the property taxes, common area expenses, building maintenance, and utility costs. Ask the seller to give you a copy of the lease before signing the contract. Then let a commercial real estate attorney review and assess any possible liability with the lease.
Suppose a new lease is included during the sale; ensure you add an absolute triple net lease into the new lease term.
If you’re looking for rental properties without landlord duties, then Wendy’s real estate is your best bet. You can use this investment to diversify your portfolio and build equity with low-touch, consistent returns in NNN properties.
When seeking a triple net property for sale, it’s vital to check their investment returns. Thus, you’ll need to determine the return on investment that best suits you. It’d be best to research the market and determine the current pricing and cap rates.
An NNN investment comes with different returns, depending on factors like the tenant, landlord responsibilities, location, remaining lease term, and year of construction.
Tenants’ Business History
Buying and holding a real estate property is often challenging due to operating expenses and landlord duties. However, that’s not the case with triple net lease properties. NNN properties provide good ROI once there are creditworthy tenants.
NNN properties often have tenants with long-term leases ranging from ten to 25 years. Thus before buying a restaurant space for sale, ensure you review the tenant’s business history. Have they been making tax and insurance payments stipulated in the lease agreement? Do they pay their rent on time?
You’ll need to determine if the current tenant will continue renting the property when you buy it. Also, check that the renter has been complying with the lease term for a long while.
Triple net properties provide investors with a low-risk investment option while enjoying a consistent, long-term revenue stream. In a triple net property, the tenant pays for the operational costs and a monthly rental fee.
Investing in triple net properties entails considering the geographical location, potential returns, tenant’s businesses history, demographics, and the company’s services or products. Before signing on the dotted lines, ensure you make thorough market research and careful observations by interviewing the customers and tenants.
Suppose you wish to buy a Wendy’s or other similar fast food, contact Buy NNN Properties today to view available properties at affordable prices.