Steady cash flow and long term deal stability: two important characteristics that any investor looks for in a real estate investment. The Structured Investment team at Senné has experience investing in all segments of the real estate industry. But one investment structure that stands out among the rest due to its stable nature is the triple net lease (NNN) investment.
If you’re an investor looking to buy into a deal with predictable cash flow returns, without the headaches and hassles of day-to-day property management, read on to learn why investing in properties with NNN leased tenants could be right for you.
What is a Triple Net Lease?
In a NNN investment, a tenant or lessee contractually agrees to assume payment of all the expenses associated with the property, including operating expenses, real estate taxes, property and liability insurance and any capital maintenance or improvements to the interior or exterior space. The tenant covers these costs in addition to the rent they pay directly to the landlord.
This is a unique lease structure because, in more typical gross, single or double net leases, the landlord is generally responsible for paying building-related costs. This is why rents for a NNN lease are lower than standard rents because of the additional costs absorbed by the tenant. NNN leases are also typically long-term leases, lasting 10 years or more offering long term cash flow and significant tax benefits.
Add Stability To Your Portfolio
There are a number of reasons why an investor should consider adding a NNN property to their investment portfolio. Firstly, the longer length of a typical NNN lease gives the property owner stability. Having a tenant sign a long term lease significantly reduces the risk associated with filling vacancies in the future. Secondly, when the lessee is responsible for paying all the costs associated with a property, it significantly lowers the risk to the investor as it generates a steady stream of income, without any unforeseen expenses that might arise in the future.
Triple net leased properties are viewed as a conservative, low-risk addition to investment portfolios as a way to build wealth. While investors hold onto the property, they receive a steady stream of income that can be reinvested in other opportunities to further diversify their investment portfolio. NNN leases are also great for investors looking for a passive, hands-off opportunity. If you aren’t looking to be a landlord who handles day-to-day property management, triple net leases are the right investment for you. Similar to a high yield bond in many respects, NNN investments are great for investors looking to sit back and rake in steady payouts.
Lower Risk Even Further With A Syndication
By investing in a NNN property within a professionally organized syndication deal, you lower the risk for your investment even further. You can invest in multiple syndications diversifying your real estate investments by geographic location, tenant industry, lease duration, and property type.
The Structured Investment team at Senné, with over 90 years of collective real estate investment experience, actively reviews hundreds of real estate investment opportunities each year choosing only those investments that meet our current investment strategy and stringent underwriting criteria. We also invest alongside our investors, equally at risk, giving all investments our full attention throughout the hold period.
Recently, our focus has been to find and partner in real estate syndication deals for accredited investors. By partnering with the seasoned, experienced real estate investment professionals at Senné, investors gain access to quality investment opportunities without the stress of sourcing, underwriting, financing, closing, leasing, managing, and ultimately selling the property. Simply put, real estate syndication is an effective way for our investors to passively invest in large operating properties and development projects that are much larger than they could afford on their own.
Private real estate investment syndications provide predictable investor cash flow, long term appreciation, portfolio diversification, and shield our investors from volatile equity market swings while providing unique tax advantages relative to other asset classes. Clearly defined operating agreements provide all of the details and rules that we follow to ensure proper compliance and reporting.
Once the NNN leased property is acquired, our investors can sit back, relax, and collect payments in the form of quarterly cash flow distributions and lump sum payouts at refinancing and disposition while Senné does all the work. We prepare the quarterly/annual financial statements, quarterly investor statements and annual tax returns providing absolute transparency to our investors along the way.
If you’re looking to learn more about real estate syndications and how to get started, contact Senné’s Chief Financial Officer, David Keiran at [email protected].
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