WHAT IS A NET LEASED INVESTMENT?
Net Leased Investments are a type of commercial real estate investment common throughout the United States. Different forms of Net Leases define the obligations of lessor (owner, landlord) and lessee (tenant).
DEFINITION OF NET LEASES
The most common lease types are:
The net lease structure favors the landlord and makes the investment ideal for investors who are not local or who do not want to be involved with property management.
Critical to a successful net-leased investment is the quality of the tenant and, to a certain extent, alternative uses should the tenant vacate or default. In general, the stronger the tenant, the lower the cap rate (return on investment) will be.
TYPES OF NET LEASED INVESTMENTS
INVESTMENT VOLUME AND RETURNS
Depending on the area, solid NNN investments can be found from approx. $600,000 and up, with cap rates starting at ca. 5.75% p.a. for the strongest tenants. Possible property appreciation is not included in cap rates and may be calculated separately (IRR).
Trophy properties and/or trophy states such as Florida often demand higher prices and thus lower cap rates. This trade-off has to be decided by every investor according to his/her preferences and investment goals.
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