Net Lease Investments 101

There are some commercial real estate investors that want  a safe place to invest their money when there are alot of fluctuations in the financial market. A stable, predictable investment are not as easy to find however, smart investors do have choices. Investing in single-tenant, net-leased properties, which many investors also can call a corporate bond combined with real estate investments may be a great option.

What are single-tenant, net-leased investments?

A single-tenant, net-leased investment is usually a freestanding office, retail, or industrial building that is leased and occupied by one user or one company. The existing tenant has committed to a long-term lease – usually longer than 10 years, and as long as 25 years with subsequent rent increases over the full term of their lease. A tenant with a net lease is pays rent plus some or all of the operating expenses (NNN or NN) of the building such as taxes, insurance premiums, repairs, and utilities.  Specifically, in the case of a triple net lease, also known as NNN leases, the tenant agrees to pay all of the building’s operating expenses, real estate taxes and insurance. In comparison a multi-tenant lease investment may only have 7 years on the term which doesn’t hedge the market as well as a longer term lease.

A net-lease investor may have previously owned other types of real estate and now they want an investment that requires less maintenance and supervision. As an example, an apartment investor sells their high-maintenance properties and then will re-invest the sale proceeds into a  single-tenant, net-leased retail property,  land owners may want to do the same thing because they never received any income or tax benefits from their property. Typically Net lease investments have lower cap rates and higher valuations.