Triple net leases (NNN) are lease agreements in which tenants, in addition to their rent, promise to pay their fair share of expenses related to the building’s insurance, property tax, and maintenance. NNN leases are the most common type of commercial leases.
The landlord arrives at a lease amount by dividing the annual cost of running the building by the total square rental footage.
From the tenant’s point of view, the base rental fee is kept low, and the occupant does not have to pay the cost of an overestimated rate. A drop in operating expenses also means a reduction in gross monthly rent.
Types Of Leases
Other types of commercial leases include:
- Single Net Leases (N)
Tenant pays base rental charge plus property taxes.
- Double Net Lease (NN)
Tenant pays base rental charge plus property taxes and building insurance.
- Full-Service Lease
Tenant pays a flat annual rent and an agreed operating expense fee.
Tenant pays a base rent, operating expenses, and a monthly fee dependent on the tenant’s revenue.
Triple Net Advantages
Triple net leases are popular because of the following advantages:
- NNN leases Are Long-Term
Commercial leases are typically longer than residential ones. NNN leases are, however, longer than other types of leases. These types of leases can last for 25 to 30 years, and this is an advantage to the landlords because there is minimal turnover and reduced vacancy rates.
- Landlord Responsibilities Are Minimal
Most of the responsibilities in a triple net lease fall to the tenant, leaving the landlord with little to do. NNN leases are one of the best ways to earn passive income in the real estate sector.
- NNN Income Is Consistent
The length of these types of leases makes them a reliable source of income. NNN investments are low-risk investments with almost guaranteed returns. An increase in rental fees after some years may be structured into the contract in some lease agreements.
- Investors Can Transfer Leases
You can let go of your NNN investment anytime you want, even if the lease is still ongoing. NNN investors can quickly sell their assets if they spot better opportunities elsewhere or need cash for new investment.
Disadvantages Of Triple Net
However, there are certain downsides to NNN real estate investing:
- Earning Caps
The tenant covers operating expenses, so there is a limit to how much you can get as rent.
- Harder To Find Tenants
Finding a tenant to fill up a vacancy is not always easy. NNN lease properties are often constructed with a specific type of tenant in mind. Newer tenants are often unwilling to bear the financial burden of remodeling a building.
O’Reilly Auto Parts is one of America’s largest auto part dealers. The retailer supplies auto equipment and accessories to service providers and individuals. O’Reilly was founded in 1957 in Missouri and has gone through several mergers and expansions since. Currently, oreillys real estate portfolio span over 5,600 store locations across the United States.
O’Reilly NNN Leases
O’Reilly Auto Parts offer excellent real estate investment opportunities. The company is searching for leasable properties on which to open new stores. O’Reilly is functional in 47 US states, including Hawaii and Alaska. The company has an architectural design team that supervises construction for its stores and distribution centers.
O’Reilly’s real estate leases are usually NNN or NN. They offer long-term structures of up to 20 years. O’Reilly Auto Parts NNN property listings are typically considered investment-grade and may come with rental fee bumps and several renewal options.
There remains a high demand for auto part store investments. The increasing age of automobiles on the road continues to fuel demand for auto parts. Potential investors in O’Reilly Auto Parts NNN leases would want to do the following:
- Decide On How Much Income You Want From Your Investment
NNN investments offer relatively reduced returns than other leases. You want to invest in a property whose profit potential suits your short and long-term objectives.
Other factors you may want to consider before investing in an NNN property:
- Location Of The Property
The ideal NNN property location is accessible from multiple points. The geographical location and other economic indices will influence your returns on investment.
- The Type Of Business
Some businesses are more suited to NNN investments than others. The ideal NNN investment will continue to thrive in times of recession and economic uncertainty. These include convenience stores, drug stores, grocery stores, dollar stores, gas stations, auto part stores, etc.
- Consult A Real Estate Agent
A real estate agent will bring you up to speed on the nuances of real estate investing. You may not be able to maximize your investment without professional guidance. Your real estate agent should have experience brokering triple net leases.
- Get Funding
NNN financing comes with unique requirements. An investor would have to possess a net worth of at least $1 million, besides the $200,000 income or $300,000 for joint investors. Investors who cannot make such an outlay can take advantage of Real Estate Investment Trust (REITS) or private lenders.
- Make an Offer
You will find several NNN O’Reilly’s real estate listings online. Analyze each one carefully and see which ones tally with your investment objectives. Contact your real estate agent to submit a formal offer when you reach a decision.
- Inspect the Property And Close the Deal
Property held on long NNN leases may go through much wear over time. It would help if you inspected the property thoroughly before proceeding. Your lawyers should also go through the fine details of any existing lease before you make a down payment. When you are satisfied with the outcome of your vetting, you should arrange a meeting to close the deal.
Whether you should invest in an NNN property depends on what you want from your investments. If you want a passive, consistent source of income that can stand the test of time, then you may want to find an O’Reilly Auto Parts real estate for sale. You should be aware that your profit margins may be smaller than what you will get from other types of lease investments.