As an investor in commercial real estate that would love to enjoy passive investment, NNN properties are your best bet. These properties are the new favorite of investors for many reasons: it offers a long-term passive income with minimal responsibilities for you as the landlord. Even better, they’re low risk.
Before dabbling into triple net (NNN) investments such as Starbucks stores for sale, you’ll need to work with an experienced NNN investment broker or check online listings. We recommend you do the former because it’s often hard to find solid triple net properties.
These investment properties types are usually marketed to some particular audience: popular NNN investment groups or investment brokers.
If you’re considering buying NNN properties such as Starbucks stores for sale, there are things you’ll need to look out for before making the payment. However, before we delve in, let’s understand what the triple net or NNN lease is all about.
Understanding Triple Net Lease
A NNN lease is a property lease agreement where the tenant pays all the building’s operating expenses, including real estate taxes, insurance, and maintenance, plus the rental fees and utilities. However, triple net lease charges are lower compared to standard leases because the renter assumes almost the property’s ongoing expenses.
Tenants prefer triple net properties because it allows them to customize the building without buying the property. NNN leases are also beneficial to the property owner because they’ll have a reliable income source with a reduced role in its management.
What to Look Out for When Buying the Best Starbucks Store for Sale
As an investor intending to buy a Starbucks property or any other NNN investment, you’ll need to look out for the following:
Recognizable Companies and Brands
Ensure you invest in triple net properties with recognizable long-term companies, for instance, those running a Starbucks franchise business. These established brands have a huge customer base, ensuring the triple net investment’s success.
Tenants that sell essential products like Starbucks will continue to stand even when the economy is in recession, so consider that when choosing a triple net investment property to buy. I’m sure you wouldn’t want to end up with tenants that’ll quit the lease due to bankruptcy issues.
One reason investors prefer triple net properties is the steady ROI without landlord duties. Consider diversifying your investment portfolio with NNN properties while building equity and enjoying low-touch, consistent investment returns.
Before buying a triple net property for sale, you’ll need to determine its investment return. Make research to understand the current cap rates and pricing.
NNN properties have different returns depending on factors like remaining lease term, location, landlord responsibilities, year of construction, and tenant.
Property’s Purchase Cost
When investing in Starbucks stores for sale, you need to understand your financing. Most investors often have at least $200,000 yearly income or $1 million. You’ve got to determine how to finance your investment: bank loan or use other creative methods to acquire the building.
It’d be best to work with a seasoned NNN lease advisor like Buy NNN Properties when navigating this market so you can easily pick the best triple net property investment and start earning passive income.
Geography And Demography
One way to fully understand a triple net property’s maximum return is to study its location and demography. That way, you can easily discover the type of tenants most NNN properties in that location have. The success of a triple net investment lies in increasing tenant demand and turnover rates. If there are no quality tenants, you might want to think twice about the acquisition.
You’ll also need to check if the area has a healthy growing economy with an increasing employment rate. It’d be best to invest in neighborhoods with a high number of consumers visiting shops, stores, malls, restaurants, and amusement parks.
Lastly, also consider the population growth of the area you’re considering. Triple net properties thrive well where there’s a high population and an increasing growth pattern.
Absolute Net Lease
NNN properties are mainly passive investment tools; thus, the property’s lease should be an absolute NNN lease. Simply put, the lease must stipulate that the tenant will fully maintain the building and handle its operating expenses, including taxes and insurance, while paying the rent and utilities.
Request a copy of any ongoing lease when buying a Starbucks property for sale and get a CRE attorney to check if possible liabilities are in the lease.
If the previous lease wasn’t an absolute NNN lease, consider asking your attorney to include that provision in the new one.
Property Location’s Accessibility
Ensure you buy an NNN property in an established and accessible location with considerable traffic, such as corner locations. However, you can check other businesses near the NNN building, especially anchor properties, to determine if they draw substantial traffic.
Summarily, you’re acquiring the Starbucks for sale in California for the income you’ll get from the lease. If the remaining lease term is short, it’ll affect your income stream too. More so, re-leasing the building is expensive.
Therefore, consider buying an NNN property with a longer lease term of at least ten years.
However, if you want to buy the property as a long-term investment regardless of its short remaining lease, request that the seller reduce the price to enable you to offset the cost of re-leasing the property.
Tenants’ Business History
Buying and holding real estate properties is often challenging due to its operating expenses and landlord duties. However, you won’t have to worry about this when you buy a Starbucks property. Besides bringing in a good ROI, your tenant will handle all aspects of maintaining the building.
Always ensure to review the tenant’s business history. Are they known for timely rent payments? Have they always made tax insurance payments based on lease agreements? Also, check that their track record regarding lease term compliance is good. Then determine if they’d want to continue renting after you buy the property.
Triple net properties like Starbucks stores for sale are relatively low-risk commercial real estate investment options that offer a long-term, steady income stream. Before investing in these properties, ensure to consider the potential returns, the tenant’s business history, the property’s geographical location and demography, and the services or products they offer.
Before buying the property, conduct thorough market research, interview the tenant and some customers and make careful observations.
Consider working with an experienced triple net property broker like Buy NNN Properties to get the best Starbucks stores for sale and diversify your investment portfolio.