Top 3 things to evaluate when choosing a NNN lease investment

Triple net leases are properties where the tenant pays the three “net” costs - property taxes, building insurance, and maintenance on the property. They also pay normal fees under the rental agreement, such as rent and utilities. This type of property is attractive for owners who prefer low-maintenance investments, where day-to-day property upkeep is managed by the tenant.

When considering a NNN lease investment, the top three things we evaluate are tenant credit quality, lease term, and population density.

Credit quality of the tenant

Tenant success and longevity is the top factor for net lease investment success. When judging potential for tenant success, we look for national tenants with high credit ratings or local tenants where the industry is historically successful, such as high-traffic services.

Lease term of the existing tenants

Properties with longer existing tenant leases afford you more time before any changes or breaks in rent payments. The ideal existing tenant has a term of 10+ years left on their lease. in reality, there is a lot of variation in lease term lengths available today and even short leases have potential benefits to you.

Population density

Net lease tenants are more likely to succeed in locations where there are many potential customers. Investing in a high-population and high-traffic location is ideal. We evaluate population within a 5-mile radius and measure street traffic - in vehicles per day - to determine the value of a specific property.

Beyond these three factors, we also evaluate tenant competition, diversity of your tenants, and more. We can help you evaluate property value and find lending that matches your needs. Contact us today for a free consultation.