Real estate investors often look for opportunities to expand their investment. Making small investments in various properties of different grades is what investors do to diversify their portfolio. However, as you may know, no investment comes with assured returns. Therefore, splitting your money and investing it in different properties may not give you expected returns from all. Plus, you’ll have to invest more time in managing those properties. A better way to boost your investment without getting occupied with day-to-day management responsibilities is NNN Investment.
What is NNN Lease Investment?
A triple net or NNN lease is a single-tenant arrangement that requires the tenant to pay all operating expenses associated with the property they have rented. Generally, what we see under a gross lease, the tenant pays a flat rent a part of which is then used by the property owner or landlord for paying all operating expenses like, utility, insurance, property taxes, etc. Under this kind of agreement, the property owner is responsible for maintaining the property. On the other hand, a NNN lease removes the burden of property management from the property owner’s shoulder by asking the tenant to cover three major operating expenses – insurance fee, property taxes, and maintenance cost.
Benefits of NNN Investment –
- Relief from property management – One of the biggest benefits of investing in NNN properties is that you don’t need to spend anything in managing the property. As all operating expenses are supported by the tenant, NNN investors enjoy free flow of income without any liabilities.
- Increased Cash Flow – Investors can expect an annual hike in the rent throughout the lease period. In other words, their income increases every year under a NNN lease.
- Tax advantages- NNN properties qualify for a 1031 exchange, which means, you can exchange any investment property for a NNN property using a 1031 exchange and defer up to 100% capital gains tax.
- Little-To-No Risk of Default – The majority of NNN tenants are big established companies such as CVS, KFC, Walgreens, McDonald’s, etc. As such companies are generally backed with strong funding, they are likely to make timely rent payments. Therefore, the risk of default drops significantly under a NNN lease.
Can NNN Investment be used for closing 1031 exchange?
Yes, it can be. 1031 investors often use NNN investment to close their 1031 exchange. As per the rules established by the IRS, properties involved in a 1031 exchange must be held for use in business, trade, or for investment purposes. Since NNN properties are also used for business purposes, they qualify for a 1031 exchange. So after closing on the sale of your relinquished property, you can identify different NNN properties in your 45-Day Identification Period. However, your transaction should comply with 1031 exchange guidelines laid down by the IRS.
Where to begin with?
You must act depending upon where you stand in your 1031 exchange. For example, if you’ve already closed on the sale of your relinquished property, you may want to accelerate and locate your NNN property as quickly as possible. However, no matter what, you must consult a NNN advisor before getting on board with NNN Investment. An experienced NNN advisor may provide you with 1031 NNN Properties List, which will make your hunt for a replacement property easy.
To speak to a NNN advisor, you can call 888-993-2835 or email us at info@triplenetlease.com
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