Triple net or NNN leases are standard practices for commercial real estate investors for many reasons. However, finding triple net properties that offer value for your investment is tricky, seeing as some listing websites don’t have filters to enable you to narrow down your searches to find NNN properties that offer value for your money.
Suppose you’ve decided to buy a McDonald’s for sale, you’ll need a reputable company, such as Buy NNN Properties, to help you find the best ones depending on your preferred location.
Read on to discover why McDonald’s NNN for sale is the most sought-after net lease investment amongst commercial real estate investors seeking to diversify their portfolios.
Understanding the Triple Net (NNN) Lease
An NNN or triple net lease is a lease type where the property tenants handle all the operating expenses of the building besides the rent.
Each net in triple net or NNN represents an operating expense category the tenant is responsible for besides their rent. These operational expenses are three: maintenance, insurance, and taxes.
Unlike the single net and double net leases, where the tenant handles one or two operating expenses, a renter under a triple net lease handles all the three operating expenses, which implies more tenant responsibility.
Why Triple Net Lease Investment
As an investor, triple net leases are incredibly advantageous. It protects owners from any inconsistent and unexpected costs while creating a stable, regular income flow for them.
For tenants, an NNN lease allows them to control a property without spending heavily on buying it. For instance, McDonald’s franchises need to meet a specific aesthetic in their locations and may want to control the properties under their franchise. Triple net leases generally grant lower rent to their tenants due to the extra cost they handle.
These are some of the reasons to invest in triple net leases:
Using the 1033 and 1031 tax-deferred exchange codes, investors can use their capital gains to make more money.
Suppose your investment property gains appreciation and you wish to sell, investing the gain from your triple net lease in another property is a great way to avoid paying taxes on the profit.
That way, you can buy larger properties, enabling your appreciation and income to grow exponentially. What’s more? You accumulate wealth without paying taxes each time you make a profit.
Rewards Without the Risks
Triple net leases are one of the most secure investment options for commercial real estate. Like bonds, single NNN lease investing in Mcdonald’s restaurants provides predictable and regular returns over time.
Tenants are franchises like McDonald’s, making them financially stable and low-risk. There’s a low risk of re-releasing compared to other lease types, as tenants agree to long-term leases.
Property Management Freedom
One primary reason investors go for NNN properties is that they’ll be free from the property management obligation associated with owning a property.
Seeing as the tenant pays for the taxes, insurance, and maintenance of the property, as an owner, you won’t be bothered by the property maintenance. Thus, the owner is exempt from the time commitments and burdens of managing the building.
Finding the Best NNN Properties for Sale
Triple net (NNN) leases are mostly single-tenant free standing retail buildings with one or more tenants. Examples of NNN lease include shopping malls, pharmacies, restaurants, and auto car repair stores.
Some listing platforms allow you to search particularly for buildings with net leases, while you can easily search for McDonald’s NNN leases in most of these property listing sites.
Net Lease Investment Evaluation Strategies
There are two strategies for evaluating a triple net lease investment opportunity: Value Add or Core bucket.
The value-add bucket includes less straightforward deals, often coming with a return profile. Most times, these deals are properties a motivated seller wants to sell off due to the tenant’s lease renewal uncertainty.
An investor can obtain the building at a discount, renegotiate and renew the lease after adding significant improvement.
Conversely, the Core bucket contains deals with strong tenants, long-term leases, periodic rent escalations, and stable cash flows. Thus, they’re often low risk.
Net Lease Returns
Because triple net leases are stable and long-term, their returns are often lower than the rest. It’d be best to position the building as a turnkey investment to ensure a buyer pays the full market price and get maximum return potential for your NNN property.
A net leased property’s return is due to two primary elements: future rent increase before the lease ends and the remaining amount of time before the rent runs out.
An investor can give the tenant cash to improve the building in exchange for a lease extension or offer smaller rental increases so the tenant can go for a long-term lease.
Why McDonald NNN Lease
McDonald’s triple net lease opportunities have many benefits as an investment alternative for property investors that seek to invest their money into the world’s most recognized restaurant.
There are several McDonalds NNN for sale nationwide, and most feature a 20 year absolute triple net lease, guaranteed by McDonald’s Corp.
McDonald’s NNN for sale cap rate is between 3.50 to 4.75 percent, with a rental increase of about 7.5 to ten percent every five years. All McDonald properties are located in strategic and heavy traffic areas.
The McDonald’s Corporation is the world’s largest hamburger fast food restaurants chain, scattered over 119 countries, across 35,000 locations, with about 70 million customers daily.
More so, McDonald’s is an A-rated investment grade tenant with a stable outlook. The company also has the highest credit rating compared to other quick-serve fast-food companies. Thus, McDonald’s is a quality tenant that won’t pull out due to liquidation.
Triple net lease properties are popular investment options that seek relatively passive involvement in managing their property and stable cash flow.
However, investing in NNN isn’t easy. Buyers will need a considerable amount to evaluate the deal from various angles, ensuring the investment meets their time horizon and risk tolerance.
Suppose you wish to invest in a McDonald’s NNN for sale; contact Buy NNN Properties to help you get the best deals. Our experts are always available to work with you based on your budget and preferred location.
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