Factors to Consider When Buying Net Leased Properties

Written by admin on May 18th, 2011

There are quite a few things that you should think long and hard about before you make the decision to buy a net leased property. Doing your “due diligence” before you decide to dive right in and buy can save you quite a few headaches down the road. Below are just a few of the things you’ll want to consider before you take that giant leap to a more profitable financial future.

Is the Location of the Net Leased Property Favorable?

Location matters whether you’re purchasing a home, personal business structure, or investment property.
•    What’s the neighborhood like?
•    Is it booming and growing rapidly?
•    Is it in a state of decline?
•    What’s the competition like?
These are all important things to notice about any property you are considering, whether it’s a NNN lease or some other investment property.

What are the Terms of the Existing Net Lease?

More importantly, is the property currently leased? If so, how much time is remaining in the lease? It’s great if you can buy near the beginning but most people find themselves buying in on the downside of the lease terms.

The good news is that most net leases are fairly long-term when compared to typical property leases. It is still good to know how long you can depend on an income from the property.

You should also find out exactly what responsibilities fall to the tenant and which would be yours as the owner of the property.

What is the Condition of the Property Being Leased?

Knowing about potential problems with the property is wise. Even if you have a lease where the tenant is responsible for the repairs and maintenance of the property, you need to have a good idea of the kind of care the tenants are taking of the property.

For the most part, businesses are concerned with safeguarding their good names and protecting themselves against legal liabilities, so they take great care of the property. It’s better to be sure though before your name is attached to the property in any way.

How old is the Commercial Property You are Considering?

The age of the property will make a difference in whether or not it’s a good investment. Many mitigating factors will make older buildings a worthy investment. For the most part, you’re better off finding newer properties with accurate records of maintenance, inspections, and code compliance. Things that will mitigate this is if the property is historically significant (and therefore of greater monetary value).

Why is the Property Being Sold when there is a Lease?

This is important. In most cases, properties are being sold simply because the other party is ready to “cash out” or move on to bigger investments. If there isn’t an obvious reason for the sale or you’re having a hard time figuring out what it is, it’s time to do a little research to find out if there are underlying problems with the property that might prompt a sale.

You can do very well for yourself when you invest in net leased properties. It is crucial that you find out as many answers as possible about the property before signing on the dotted line, in order to better protect your interests.

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