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How do I find retail properties for sale?
You will almost always have to work through a broker to obtain that information. Consumer confidence is such an important part of retail sales that no one wants to upset it with rumors that the actual real estate is for sale. Most people draw no distinction between property for sale and the business located on the property being for sale. Those that do recognize the difference assume the landlord is selling because he or she knows, ahead of everyone else, that the tenant is in financial trouble.
What if I cannot find any good retail properties in my community? Can I still invest?
Fortunately for you, one of the strongest investment trends in recent years is in something called triple-net leases, usually seen written as NNN leases. Many nationwide brokerage firms, such as Marcus & Millichap list these investment opportunities in locations as diverse as San Francisco, California, and Eufala, Alabama.
This is how NNN leases work. Typically, a developer will buy a piece of land. Using his or her contacts, the developer will find a company such as Walgreens, Subway, or Starbucks that wishes to be at that location. The developer will sign a long-term lease, usually twenty years with several five-year renewals at the option of the tenant. Next, the developer builds a building according to the tenant's specifications exactly. The tenant takes occupancy and pays rent every month, plus takes care of all maintenance, upkeep, repairs, renovations, taxes, and insurance. The developer/landlord does absolutely nothing except deposit the rent check every month.
The developer then sells the property as a category of investment called an NNN lease. That indicates to any purchaser that a longterm, financially strong tenant is in place and the landlord has absolutely no financial or management responsibilities. Investors do the equivalent of buying a long-term certificate of deposit, except in real estate. The investor's confidence is in the tenant. If you trust Walgreens and think it will pay its bills for the next twenty years, you really do not care if it is your tenant in your hometown or in a semirural area one thousand miles away.
How can I find NNN properties for sale?
The Marcus & Millichap website previously mentioned requires registration before you can view properties, but there is no charge. To search on the Internet for other brokers, search for "NNN lease investments." You will find more sites than you will have time to sift through.
How much should I pay for an NNN lease property?
Your purchase price will depend on something called a discounted cash flow analysis. This sounds complicated, but it is really pretty easy.
What happens at the end of the lease term if an NNN tenant moves out?
You still own the real estate. You can hire a broker and sell or rent it to someone else. Or, if you received all the value you wanted from the property, are satisfied with your returns, and do not want to think about it anymore, just fail to pay the real estate taxes the next time they are due. Someone in that community will buy the property for the tax bill. I do not recommend that route; I am just throwing it out there as the absolute worst that can happen. If you think about what a pain it might be to fool with that empty real estate, you gain a good insight into why national companies would often rather rent than own.