Pros and Cons of Triple Net Lease Properties

Triple Net PropertiesAs a real estate vehicle, triple net lease properties generate fixed-income. They also offer little to almost no management responsibilities, with the prospect of a gradual rise in income. In other words, they work like a bond. In spite of being profitable and reliable, like other real estates, triple net lease properties have some setbacks that you may have to face eventually.    

 

Pro: Stable Income
Con: Limited Upside

Both fixed increases and flat rent are available in the triple net lease properties structure. A 2 million USD investment at a 7.5% cap means you can get $150,000 in return every year during the lease period. Several triple net lease properties have a built-in rent increase, up to 1%-3%. Though growth is guaranteed, it won’t necessarily keep up with inflation. However, the same goes for any types of bond; be it municipal, corporate, or treasury.

Pro: No Management
Con: CapEx at Rollover

Triple net lease properties are structured in such a way that the owner doesn’t have to bear any responsibilities during the whole lease period. The ownership stint, however, doesn’t match the traditional real estate scenario. Moreover, owners are compelled to take part in the re-leasing process and indispensable capital expenditures to get ready for a new tenant.

Pro: Long-Term 100% Occupancy
Con: Risk of 100% Vacancy

In most of the cases, triple net lease properties have at least decade long lease tenure. Often the initial terms may be as long as 25 years, as well. During the whole period you don’t have to fret thinking about vacancy. However, as soon as the lease ends it becomes an all-or-nothing deal. The same applies when there is an event of a tenant default. Nevertheless, careful due diligence can help avoid such an untoward situation.

About the Author

Dwaine L. Clarke is the Founder and President of GCT Net Lease. GCT Net Lease is an investment real estate services firm exclusively focusing on Single and Mult-Tenant Net Lease Properties. The firm provides a full range of brokerage and advisory services nationwide to High Net worth Investors, Developers, REITs and Institutional Investment Funds. GCT Net Lease is headquartered in Windsor Connecticut. Dwaine is also a nationally recognized speaker and consultant. He is also the author of three best selling commercial real estate investing books. Mr. Clarke’s experience branches through close to over a decade of working with and for some of the nation’s top investors to purchase, underwrite, develop and manage millions of dollars in commercial investment real estate. For his case, he has not only assisted these investors, but also became a student of theirs. Through careful analysis he started to understand what these investment experts were doing, using top strategies to buy, manage and sell their investment properties for maximum profit. He especially took note of how these investors were leveraging their time and how they made their decisions without interfering with their personal or business lives. Mr. Clarke is also active in investing and creating real estate partnerships, providing a vehicle for high net-worth individuals to own income producing real estate.

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