Net Leased Investments are acquisitions of commercial real estate with a long-term quality tenant, where all or most of the property-related costs are the tenant's responsibility. Different types of net leases define the financial obligations of the lessor (landlord) and the lessee (tenant).
Most advantageous for an absent or passive owner who does not want to be involved at all is the Triple Net Lease or NNN: The tenant pays rent, property taxes, property insurance and all maintenance and repairs. The owner's monthly rent cheque contains a net amount without any deductions.
Benefits: For the landlord, the net lease structure creates a steady and predictable cash flow, and makes the investment ideal for investors who are in a different location than the property and/or do not want to be involved with property management. For the tenant, a net lease allows use of one or many properties without the cost of acquiring them, often at favorable rent rates since the tenants are taking on extra cost.
Types of tenants, among others, include Fast Food (Burger King, McDonalds, Chick-Fil-A etc), drugstore chains (Rite-Aid, Walgreens, CVS), big-box retailers (Kohls, Staples), banks, office buildings, medical facilities etc.
Prices begin just under $1m and can reach $70m and more; financing is common and available for most if not all acquisitions.
Returns in Q2 2023 came under pressure, and in Q3 typically now range from 4.5 to approx. 7.0 percent. Increasing interest rate and returns bring cap rates under pressure, so there is a slight uptick in returns as well as occasional price improvements.