Building a NNN investment property portfolio involves strategic diversification (NNN investment properties). There are several ways that you can follow to get the most out of your investment by:
- buying different asset types (core – 4%-5% returns, core plus – 9%-13% returns, value add – 13%-18% returns and opportunistic – more than 20% returns),
- investing in different geographic areas, or
- diversifying by mixing investment property risk profiles, or
- diversifying by choosing properties with different levels of management responsibilities.
The idea is that while a particular market may be weak, the gap in profits will be made up of an asset in a stronger market. Doing this allows investors to weather the highs and lows of each NNN triple net asset type, thus increasing their chances of making a profit on their properties as a whole.
How do you choose a collection of optimal net lease NNN investment properties to maximize your financial potential and balance your growing NNN net lease portfolio? First, define your goals, then look at a range of properties that fit your financial ambitions, lifestyle, and risk tolerance. Keep in mind what you see listed on the open market is only a portion of what’s available. There are developers, builders, and corporations that search for buyers without listing their properties.
Establish a diversified inventory of different NNN triple net tenant uses across the nation with varying lease duration, terms, and cap rates. This may include dollar stores, healthcare/pharmacy, industrial buildings, banks, gas stations, and/or convenience stores, QSR restaurants, etc. And, be sure to answer these questions when you search for properties:
- Do you own net lease NNN property that can be used in a 1031 exchange?
- Do you want equity for financial or collateral?
- Do you need tax write-offs?
- Do you have to pay down any debt?
- How hands-on do you want to be in your investment property?
- Do you need depreciation or appreciation?
- How much monthly income do you need?
In exchange for completely passive income with no expenses, absolute NNN properties or NNN ground lease investments offer a slightly lower cap rate between 4-7%, yet offer long-term predictability and increasing cash flow for decades. These properties are leased to high credit, national, corporations such as McDonald’s, Dollar General, Walgreens, etc. The tenants pay for everything – operating expenses, taxes, maintenance, and capital improvements. As the investor, you are protected from unpredictable, rising operating costs while collecting steady monthly income.
As a landlord, you may not have to be heavily involved in day-to-day management, and on average, with net lease investments, you’ll realize 5% to 8% capitalization rates, and an internal rate of return (IRR) from 8%-24% over time.
Creating a diverse NNN property portfolio, made up of assets associated with different levels of risk, allows you to balance dependable, lower risk, low-maintenance NNN investment properties that offer lower returns with high risk, NNN net lease investment properties that promise higher returns (NNN triple net tenant).
Just like every investment carries a certain amount of risk, NNN net lease properties within an NNN portfolio also must have relatively uncorrelated (NNN triple net asset), risk-adjusted returns, if done correctly. So that’s why you will need someone who can address these complex issues of building a portfolio, for you. The best way is to consider the expert agents and brokers at the Triple Net Investment Group. Call today.
