#realestateinvesting #commercialrealestate #passiveincome #passiveinvesting

There is a myriad of investment strategies in real estate that are effective in creating true generational wealth. Triple-net leases are a lesser-known but excellent investment vehicle for investors because they generate steady passive income with very low risk. Triple-net leases come in a variety of options. However, today I want to talk specifically about investing in single-tenant triple-net leases with an investment-grade tenant.

For example…Think Walgreens, CVS, or Dollar General.

Similar to most investment strategies within real estate, there are numerous advantages that come with investing in triple-net leases. For today, let’s stick to 3 reasons you can benefit from investing in NNN leases.

Mailbox Money

You hear the term “Mailbox Money” thrown around a lot as the ultimate goal of real estate investing. Whereas most investments don’t qualify, a true triple-net lease actually is mailbox money. When set up correctly, NNN leases are 100% passive and you receive a check every month. On top of this, you have zero managerial responsibilities, you don’t have to take any phone calls, and you don’t have to deal with the headaches that come with tenants, toilets, trash, and trouble. If any part of the property, such as the building itself, the parking lot, the HVAC, etc., is in need of maintenance or repairs, it is the tenant’s responsibility to fix it. It’s really an example of what people mean when they say “mailbox money”!

Zero Liability

Another great advantage in addition to having no managerial responsibility and getting mailbox money is you have no liability. The tenant is not only required to have the building and their business insured but to cover you as well as an additional insured. Since the tenant pays for this insurance, this is a huge win for you as this is a major expense associated with real estate investing. Even though it’s not required by lenders to have your own insurance policy on these assets, insurance for your entity or holding company is a personal choice. I always advise consulting with your attorney to make sure you are insured to your comfort level.

Non-Recourse Debt

The last big advantage in our conversation today is the ability of these assets to qualify for non-recourse debt. In case you are not aware of this term, non-recourse debt is where the bank’s only recourse is the asset itself and you are not required to be a personal guarantor. As a result, this gives you a favorable balance sheet which allows you to qualify for further leverage to acquire more assets!

You can see why the tenant is such an important part of the NNN lease investment strategy. An investment-grade tenant is highly attractive to a non-recourse lender. There are a few major reasons for this but the main one being if the location of your commercial real estate has issues, the lease wouldn’t be in danger of default. A non-recourse lender wants to know their investment is very secure. What could be more secure than the lease being paid and guaranteed by a national corporation with an outstanding credit rating acting as the guarantor? The bank is happy and you are happier!

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