Finding High Cap Rate NNN Properties
There are a lot of investors out there who are looking for high cap rate NNN properties. Unfortunately, most of the inventory that is listed at a high cap will be undersirable to the average net lease investor. Most net lease investors are looking for a management free, passive real estate investment. Traditional high cap rate properties just don’t fit that description. However, there are some creative ways that investors can achieve higher cap rates if they are willing to take on some risk.
Tips to Find High Yield Triple Net Real Estate
Here are a few things to look out for that may help you find high yield NNN properties.
Short Term Leases: A large portion of the buyer pool for triple net lease properties will overlook leases with only a few years left. They just don’t provide the long term security that buyers seek.
This presents an excellent opportunity for investors who are willing to take on some additional risks. Of course, with short term leases a buyer must be very familiar with the tenant, location and viability of the business in that location. This is where a good broker can be extremely beneficial.
A good broker will know the target demographics for the tenant and whether their current location is viable. If sales are available that is even better. The broker should know what a healthy rent to sales ratio looks like and whether the tenant is paying too much in rent to sustain their business. They should also know if there are any other buildings that the tenant may choose to relocate to.
NNN Leases With Low Rent
Finding NNN Properties with below market rents and leases expiring soon is a great situation to be in as a net lease investor. While most good brokers will take the upside of these properties into consideration when pricing, there are still a lot of deals to be had. The thought of having to re-tenant the property will scare away a lot of buyers. Owners with a well diversified portfolio who can absorb the additional risk will get some great deals. For the average investor, these types of properties are their best bet to get anywhere near a double digit return in today’s market.
Best Place to Find NNN Properties to Buy
Most big name brokerage companies have several very reputable brokers who specialize specifically in NNN lease properties. That is probably the best place to start. Online sources such as loopnet and NNN Cap are also good places to look. Wherever you choose to look, it is highly recommended that you use a broker who specializes in single tenant net lease properties. A run of the mill real estate agent is not going to be able to give the best advice because it’s not their specialty.