The Risks and Benefits of Triple-Net (NNN) Properties

The NNN (net net net) deal is a popular property type in commercial real estate. This means that the tenant is responsible for all three — the tax, insurance and the maintenance. These deals have helped the part-time investor who seeks no management responsibility. Investors making use of debt financing are able to produce leveraged returns in the range of 10 percent to 12 percent. However, there is a caveat — NNN is not devoid of risks and one needs to be cautious.

While dealing with NNN one also needs to remember that the credits are not always equal. The three rating firms assess the company’s credit. It has been seen that as there is a decline in the tenant’s credit rating, the price of the property also comes down.

Leasing the property means that you are is supplying the capital for the business and this has a long term effect on the investment. While making the investment, you have to keep the past as well as future prospects in mind.

It has to be borne in mind that NNN deals are always determined by the status of the real estate industry in terms of location, size, quality, age and terms of the lease. One also needs to bear in mind the local market to assess or value a certain piece of property. Along with this there are also other factors like population, state of the job markets and incomes.

The lease is a very important part of the NNN. The buyer is expected to read and understand every part of the lease in details. The valuation of NNN deals is based mainly on the capitalized income stream.

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Pauline Go is an online leading expert in real estate. She also offers top quality articles like:
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