What to Take Into Consideration When Valuing an STNL Property?

If you’re interested in single tenant triple net (STNL) properties or you’ve only heard they are lucrative, you most likely want to learn some important things about them. What’s more, if you’re valuating them, there are also a few things you need to know.

With that in mind, we wanted to tell you more about these types of properties, and especially what you need to take into consideration when valuating them. First, let’s start by explaining what STNL properties are exactly:

What Are STNL Properties?

STNL properties (also known as Net Lease or NNN properties) are properties that are entirely leased to a single tenant. That tenant becomes solely responsible for everything about them – all property-related expenses. This includes property taxes, operating expenses, and insurance expenses. The landlord, on the other hand, has next to no responsibilities.

As you can assume, these properties are thus incredibly beneficial for investors. If you want to make money off of your property investment, but are not looking to spend time on property management, then STNL properties are your best choice.

If that weren’t enough, STNL properties provide a whole host of benefits:

· Low entry price points

· A stable and very predictable flow of cash

· Name-brand credit (if your tenant owns a well-known and respected brand)

· Higher liquidity (for a real estate asset)

Now, even though STNL leases are near-perfect, there are still a few things you need to take into consideration when valuating them.

The Main Things to Take Into Consideration When Valuating STNL Properties

The first thing you should do with STNL properties is to take a close look at the lease. This is vital for both sides because the benefits are great for both the landlord and the tenant, as long as the lease is specifically a single-tenant triple-net one. The tenants who prefer these leases want absolute freedom with the property, which is why they are ready to pay all the expenses. The landlords don’t want the hassle involved in expenses; they only want the rent. That’s precisely why the lease needs to be clearly written with specific rules that reflect all of this.

Furthermore, as the tenant is responsible for everything, the investor needs to be certain that the tenant can pay the full rent on time. That’s why your people need to make a thorough investigation of the tenant to make sure they are creditworthy. It’s best that the tenant is a franchise or a popular local business. Naturally, the best solution is that they are backed by the parent company, which ensures the credibility and how creditworthy they are.

The Bottom Line

All in all, STNL properties are extremely beneficial investments, but only if the main things are covered. As long as you make sure all bases are covered when you’re valuating the property, everything should end up being more than fine. And if you want to learn more, or if you need some help, you can always reach us at [email protected]