Benefits and Risks Linked With Triple Net Properties

Properties for which the renter pays a part or all of the maintenance expenses with the rent are called triple net properties. These are one of the most common investment strategies. Many investors prefer investing in these kinds of properties because they do not have to deal with daily operating tasks. After all, the tenant is responsible for that. Three types of triple net leases:

• Single net leases

• Double net leases

• Triple net leases

There are benefits associated with triple net properties, due to which they are a popular choice among investors.

The Benefits

• The income

The primary benefit of investing in triple net properties is passive income. The fact that the investor does not have to deal with operating expenses since the tenant is responsible for it makes a stable income source.

• Predictability

While signing a contract with your tenant, you can predict the amount of income you'll be receiving by the end of the term. It is because when signing the contract of triple net property between you and the tenant, both the tenant and investor agree on the costs they are responsible for. Therefore, you will have an idea of exactly how much your cash flow is going to be.

• Location

You can take significant advantage of the location of your property. The location of any property works has a direct impact on its value. If your property is located in a popular location, it will automatically increase the property's worth. Tenants are eager to get their home in a popular and gold location. Even if the property's price is high, it is acceptable for them because of the ideal location.

• Low Investment

The starting price of investing in triple-net properties is usually lower than others in the market. It is because they are often single-tenant places. Therefore, being an investor, you can start by paying as low as $500,000. You can start getting the returns right away.

Risks

• Dependent on single-tenant

As we discussed, most triple net properties are for single families. It makes your investment totally dependent on them. In case the tenant moves out, you need to have a backup. For example, if the family moves out suddenly and you cannot find the tenant for the vacant property, all the expenses become your responsibility. You'll have to bear everything from insurance premiums, external costs, and taxes, and you might not be ready for any of it.

• Rights of tenants

Before renting out, look out for all the tenants and owner rights. Any past problems with the property may lead to your future inconvenience. Make sure to avoid these issues.

• Interest rates

The rise in interest rates of the properties leads to a decrease in the price. If the interest rates increase, your triple net property may get cheaper comparatively. However, the interest rates have been low in recent years. But if they grow, it might be a loss for you.

Conclusion

Every property has its own pros and cons, and the same goes for triple net properties. Consider all these risks and benefits to decide the right kind of property for you.

My name is Ranny Watson. I'm a professional Digital Marketing Expert.