From Kiplinger · · 1m 50s
Sick of Landlord Work? 3 Key NNN Lease Checks
Landlords can ditch hands-on management with triple net lease investing if they check tenant credit, corporate guarantees, and long-term leases.
In brief
Landlords can ditch hands-on management with triple net lease investing if they check tenant credit, corporate guarantees, and long-term leases. Investors should prioritize tenant creditworthiness, corporate guarantees from parent companies, and long-term leases when switching from landlord to triple net lease…
Quick answers
- What is Triple Net Lease?
- Triple net lease commercial real estate means the tenant handles insurance, taxes, and maintenance while the landlord gets minimal responsibilities.
- Why Switch to NNN?
- Real estate investors sick of managing multifamily buildings or juggling residential assets can use NNN for hands-off 1031 exchanges.
- What is the key takeaway from Sick of Landlord Work? 3 Key NNN Lease Checks?
- Investors should prioritize tenant creditworthiness, corporate guarantees from parent companies, and long-term leases when switching from landlord to triple net lease investing.
What is Triple Net Lease?
Triple net lease commercial real estate means the tenant handles insurance, taxes, and maintenance while the landlord gets minimal responsibilities.
Why Switch to NNN?
Real estate investors sick of managing multifamily buildings or juggling residential assets can use NNN for hands-off 1031 exchanges.
NNN Responsibilities
With NNN, ongoing day-to-day maintenance is significantly lower than other real estate types with no calls about leaks or toilet repairs.
Tenant Creditworthiness
Tenant creditworthiness is the number one factor when evaluating single tenant net lease assets, especially for national corporate tenants with BBB- or higher credit ratings.
Corporate Guarantee
A corporate guarantee is a legal promise by one company to cover another business entity's financial obligations if it defaults.
Corporate Guarantee Pitfall
Newbie investors often find the lease guarantor isn't connected to the actual tenant, like Wendy's 456 Lakewood Dr LLC being easily dissolved.
Long-Term Leases
Secure tenants with long-term leases of eight to 20 years to avoid re-tenanting issues, as seen in dialysis clinics with 20 to 40 bays.
NNN vs. NN Leases
Absolute NNN means tenants handle all maintenance, insurance, and taxes, while NN means tenants handle insurance, taxes, and maybe some maintenance.
Key Checks for NNN
Investors should check tenant creditworthiness, corporate guarantees from parent companies, and long-term leases when switching to NNN investing.
Custom Capital
Jason Milton, CEO of Custom Capital, has closed over $460 million in commercial real estate across 125 transactions.
At a glance
Investors should prioritize tenant creditworthiness, corporate guarantees from parent companies, and long-term leases when switching from landlord to triple net lease investing.
