Not only was the business world put on hold not long ago, but the entire world was too, and we’re still dealing with the aftermath. The world economy hasn’t felt such a financial crisis since 2008, and many were not ready for it. However, experienced businesspeople and head-strong investors saw the raw potential of taking a new approach to business in a post-pandemic world – and it paid off.
Triple net lease assets, or NNN leases, are one of the most sought-after real estate leases that provide stability in unstable times.
This article will discuss what makes NNN investments and properties a smart move in today’s post-COVID world.
NNN Investments Mean Stability
Throughout any challenging economic times, NNN investments have proven to be resistant and fairly stable, meaning the landlord will suffer fewer negative consequences if things go south while experiencing more benefits than most other investment types.
The most substantial perk of making NNN investments is that these types of investments generate a reliable, consistent income in almost any given business climate – both in lucrative or less-than-strong economic times – while not burdening the investor with additional risks.
During the COVID-19 pandemic, NNN investments became a powerful option for investors looking to diversify during an unfavorable economic climate and wobbling market conditions.
NNN investments can deliver financial stability because they are signed for a longer period, usually from 7 to 11 years. Plus, landlords with NNN investments are more protected when it comes to the changing business climate, placing less risk on the investment.
During the COVID-19 pandemic, the overall commercial real estate pricing dropped by 10%, which was a clear enough sign for investors with a knack for business to jump in. The average cap rate for NNN leases has remained stable at 6.51 %, which was yet another box checked on many investors’ lists.
Being able to fend off the negative aftershocks of events like COVID-19, NNN investments persisted as a relatively stable option.
NNN Investments Bring Tax and Liquidity Perks
The IRS Code Section 1031 deems that triple net leases fall under the category of like-kind exchanges. Such an appointment means that investors can delay paying taxes on the capital profits for the assets. This is possible if the investors make a re-investment of the proceeds of the sales in an equivalent property that is eligible as a like-kind exchange during a specific timeframe.
With the perk of tax difference and the implications of the Section 1031 Code, exchange properties are perpetually on the rise, deeming NNN investments a highly sought-after leasing solution that yields a stable, low-risk income.
The Verdict: Are NNN Investments a Good Idea in a Post-COVID-19 Economic Climate?
Since a triple net lease means leasing a property for a longer period, investors have more control and better forecasting for long term performance. Given the sturdiness of the lease type, NNN leases have withstood the test of time, emerging as a favorable choice for investors, yielding profits with lower risk involved.