Nnn investments, or triple net lease properties, have become an increasingly popular real estate investment vehicle for investors seeking stable, consistent cash flows. By investing in nnn properties, owners can benefit from reliable tenants and minimal management responsibilities. However, not all nnn deals are created equal, so it’s important for investors to understand the pros and cons of various nnn property types. This article will explore the best nnn property types to target and effective nnn investment strategies to maximize returns and minimize risk.
nnn retail properties offer stable cash flow but face disruption risks
Retail nnn properties, such as free-standing big-box stores, convenience stores, and restaurants, have traditionally been a bread-and-butter nnn investment. Strong national and regional tenants sign long 10+ year leases, providing predictable income. However, the retail apocalypse has led to major bankruptcies and store closures, so investors must be cautious and selective. The best retail nnns target necessity-based businesses with loyal customer bases, such as dollar stores, fast food, and pharmacies. Daily traffic at these establishments ensures continued tenant demand.
nnn industrial properties benefit from the e-commerce boom
Warehouse and distribution nnn properties are increasingly attractive as tenants like Amazon and third-party logistics companies expand. The rise of e-commerce and same-day delivery require more local fulfillment centers located close to population centers. Look for smaller multi-tenant facilities near major metro areas. Avoid specialized properties reliant on a single tenant unless their business is clearly thriving.
nnn medical office buildings tap into healthcare industry growth
Medical office buildings (MOBs) make one of the top nnn property types, thanks to the growing healthcare industry and aging population. On-campus MOBs affiliated with leading hospital systems are ideal. Off-campus MOBs work too if tenancy is diversified across different practitioner groups. Execute longer leases with healthcare providers when possible to maximize cash flow stability.
sale-leasebacks provide instant property appreciation
A sale-leaseback transaction involves purchasing a property from its current owner-occupier, then leasing it back to them on an nnn basis. This can provide advantageous terms for the buyer, including an immediate boost in valuation. Look for corporate-owned locations with plenty of useful building life remaining. Offer attractive lease terms to encourage the seller-tenant to sign long-term.
The best nnn investments target industrial warehouses, medical offices, and necessity-based retail in prime locations. Execute longer leases with quality tenants when possible. Sale-leasebacks can also provide instant property upside.