When it comes to investment in commercial properties, the risk often runs high. Just imagine the stress that a vacant rental space can bring. Even if the place is occupied, you may feel anxious about maximizing income and lowering expenses. Triple net leases make a wise choice for investors looking for a consistent and reliable income along with a low-risk opportunity to build equity. The lease arrangement lets you pass on the taxes and operating expenses to the tenant. You can be stress-free about market fluctuations and hikes in taxes. But everything boils down to setting up the lease effectively. Here are some tips on doing it.
Understand the advantages of NNN
Even before you set up the lease, you must understand the advantages of this option. Triple net leases free you from the cost and stress of managing the rental property as you need not worry about paying the taxes, insurance, and maintenance expenses. You have the benefits of income and investment stability. Additionally, equity building is a part of the package. Once you have a clear view of the benefits of NNN, you will have valid reasons to go ahead.
Invest in the apt property
The best NNN investments are the ones with an established and accessible physical location to run commercial operations. When you look for a Triple net lease for sale, pick for ones located in business hubs, even if you have to pay a tad more. Rental spaces in these areas are likely to be in high demand, so you never have to worry about missing out on income. Once you have the right investment, you are all set to go ahead.
Ensure you have a reliable tenant
In most cases, there is already a tenant agreement when an investor buys an NNN property. You must have a look at the agreement and understand the clauses outlining the financial responsibilities of both the owner and tenant. It is vital to pay attention to every detail of an existing deal if buying the property. Conversely, you must get a professional agreement if setting up a new lease for your place. Get a clear understanding of the expenses you must handle and the ones to be picked by the tenant. Study the term and renewal criteria as well.
Collaborate with an advisor
Whether you plan to buy a property with an existing triple net lease or want to set it up from scratch, avoid handling it alone. A net lease advisor can be your best guide in both situations. They can help you structure the arrangement according to exact specifications and goals. Further, they can also advise you about vetting the prospective tenants before entering the agreement. You need to assess their credit scores, evaluate their business plan, and consider long-term success prospects. An advisor can also offer recommendations about selling the property if you plan to do it when the market peaks.
Setting up a triple net lease requires a good understanding of the market and NNN agreements. You also need to find tenants with high-earning potential and viable long-term growth prospects.