Over the years, NNN leasing in California has grown to remarkable extents. As a result, several investors have turned their sights on this lucrative market. However, before one invests, it’s a prerequisite to gain sufficient information on the topic.
Recent research has it that in the past year alone, dividend yield from NNN properties reached a stunning average of 5.49%, a 1.7% increase compared to 2019’s. This result shows that people shied away from the triple net lease in the past because of misconceptions regarding its risks.
However, due to the current increase in demand, the NNN Property leasing industry has experienced some growth. Therefore, it won’t take time before prices increase as profits from faithful investors skyrocket – which is why now is the best time for you to make your investment.
In California, mainly, opportunities have arisen for people to make quality investments. However, before making any decision regarding investments, you must acquire enough knowledge about NNN leasing in California.
Six Factors You Should Consider When Buying an NNN Property in California
Before you buy any NNN property in California, here are six factors you must consider:
Location affects how much you’ll make during your investment period. It’s relatively more profitable to own a property where tenants are more likely to prefer. There are certain things you should put in mind when selecting a location. Some of them are:
- Demographics: know the type of people who live in that area and what they do.
- The number of people living within a mile’s radius or a little farther constitutes the area’s population density. This point is crucial, especially when you require a fast-food restaurant for sale.
- How easy is it for people to see the property, especially during rush hour (when there’s traffic)?
- Accessibility of the place: while it may be easy to spot your property, certain physical limitations such as curbs may prevent people from accessing it quickly.
The Financial Capabilities of Clients
Tenants that patronize renowned credit companies are desirable to investors. As an investor, you should be able to make inquiries concerning the credit status of your clients and get trusted responses.
This way, you’ll know which tenant is capable of paying rent in the long run. So, if the tenants use credit facilities with issues in the past or are not financially stable, you should invest in another opportunity with better clients.
Often, there are opportunities for tenants to renew their period of stay. In such cases, as the landlord/investor, you must understand that the longer the tenant stays, the less likely it is that he’ll pay a higher rent.
Suppose the average market rent for buildings of the same capacity or function is lower than the rent you offer the facility to tenants. In that case, they’ll likely begin to ask for a reduction in rent at some point.
Now, imagine if the tenant opts in for renewal for five years, your income will considerably reduce, and you’re likely to experience loss because of further expenditure.
As the tenure of the tenant draws near to a conclusion, you’ll undoubtedly invest in refurbishments. These renovations are called ‘tenant improvements,’ and they’ll not only attract new tenants but also potentially increase the rent they’ll pay. So, it’s best to make sure the options for renewal aren’t too long.
A critical point to consider is how much the rent is. You may think that tenants who pay higher rent will bring more income to you than those who spend a relatively lower amount.
You aren’t entirely wrong. Nevertheless, in the long run, this is disastrous. If your property’s rent is much higher than the average market rent, you’ll experience high income for quite a while on your buildings.
However, when you seek to re-lease the building after tenure has expired, you stand a high chance of losing a lot of income as people will want to pay a lot less for previously used buildings.
Therefore, it’s best to start your rent at a price not too high above the current market rent. This way, you’ll be able to maintain that exact pricing or a similar price in the long run and experience stabilized income too.
As a result, rent is a significant factor that should be considered when indulging in the business of NNN leasing in California.
Longevity of the Lease Period
Studies show that the longer the lease period, the more income you’ll get. When tenants seek short-term opportunities to rent a place, the rent value will likely depreciate faster.
The reason is that they’ll want the rent to be reduced at the end of their stay. For example, if the duration of lease for a tenant is ten years, the income you’ll get from their lodge will be less compared to clients that wish to rent for about 15-20 years.
NNN properties for sale in Los Angeles typically have higher prices attached to large plots of land, but it’s still a highly rewardable investment.
Size of Land
Something else to consider is the building’s land size. For instance, if you want a fast-food franchise for sale, you’ll want to factor in parking space for customers as an incentive to patronize drive-thru’s less. If the size is enough for these reasons to be satiated, you’ll get tenants that’ll agree to use the rent at the price you offer it.
NNN leasing in California is still a very profitable business as its value continues to increase. As an investor, it’s high time you put your money into good use.
However, before you invest, remember to consider the property’s siting, land size, lease period, your client’s financial capabilities, and so on. If you give appropriate consideration to them, you’ll be able to make investments that you’ll appreciate in the long run.
With your decision made, working with the right platform is all that’s left. Therefore, ensure to visit Buy NNN Properties for the best deals.