Many businesses are looking for ways to attract capital and good loan terms from lenders, and net leases remain a solid investment option even during times of change. This form of financing remains an attractive option due to the many benefits it offers.
This article will discuss four of the major reasons why triple net leases have become more popular.
1. Guarantees a Consistent Amount of Income Monthly
Many factors can contribute to a company’s ability to secure financing for its commercial real estate needs. One such factor is the certainty of future income as determined by current lease rates and terms. This includes other factors such as the size and quality of the building under discussion.
However, if a lender knows what the future income will be, they can more accurately predict whether or not a business will be able to repay its loan.
2. Lease Rates & Terms Are Typically Fixed for Multiple Years
Another factor that makes NNN leases so attractive is the fact that lease rates and terms are normally fixed for several years. So long as the building under discussion is in good condition, this provides lenders with an accurate prediction of future income.
Since lease rates and terms are normally fixed for many years, this makes it easier for the lender to also accurately predict future cash flows that will come into an investment property.
3. The NNN Sector is Resilient & Transparent
Another reason why lenders are so keen on NNN leases is the sector’s resilience. Even during tough economic times, the NNN sector tends to hold up better than the rest of the market. This is because businesses tend to prefer long-term leases as opposed to short-term ones, and they are willing to pay a premium for stability and predictability.
The NNN market is known for being more transparent since its value is based on the terms of the lease and the creditworthiness of the tenants. This level of purity and transparency makes it very attractive to investors.
4. Lenders Often Enjoy a Margin of Safety with NNN Leases
Another reason why lenders are often more comfortable lending money against NNN leases is that they enjoy a margin of safety. In other words, lenders are typically more comfortable loaning money against a property backed by a solid, long-term NNN lease than a property with a shorter-term, more flexible tenant.
The terms of NNN property leases are also considered to be the most thorough compared to other segments of the investment world. The clear, highly detailed terms commonly found in NNN lease documents help minimize common risk and uncertainty.
Consider Investing in NNN Properties
NNN leases are becoming more popular among businesses as a form of financing because they offer many advantages over other types of leases. These advantages make them an attractive option for lenders who want to invest in commercial real estate properties.
That’s why it’s worth partnering with knowledgeable professionals when you’re interested in investing in these sectors.
Brisky Net Lease is an industry expert in every aspect of NNN properties and investments. If you are interested in investing in NNN properties, contact us today. Our team would be glad to answer your questions and provide you with options.