Most free-standing businesses like your local Starbucks, banks, or pharmacies are often under an NNN lease agreement. There’s also a fat chance that these investment properties are for sale but you’ll need to know how to find the best deal.
NNN leases, also called triple net, are often the most popular net lease for commercial real estate investors. Through triple net investment in creditworthy companies like Wendy’s, investors can enjoy steady passive income with minimal or no involvement in the building’s maintenance.
The following are reasons a Wendy’s for sale will make a great investment option for both new and seasoned investors. But before we delve right in, let’s understand the meaning of a triple net lease.
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What Is a Triple Net Lease?
An NNN or triple net property is a lease agreement where the lessee or tenant pays the entire building’s operating expenses.
The tenant is also expected to pay rent and utility costs. NNN lease investments enable the investor to generate a steady, long-term income source while offering flexibility and stability. Its also relatively straightforward to operate and own.
A triple net investment in Wendy’s real estate for sale is one of the smartest investments to make as an investor. Besides investors, tenants under triple net investment also benefit from the arrangement. Although they’re responsible for paying the property’s insurance, taxes, and repairs or maintenance, they enjoy lower rent than other net lease types.
As a property owner, before accepting a tenant in your triple net property, you need to determine their creditworthiness. You can use the cap rate to calculate the lease amount to determine the prospective tenant’s creditworthiness.
Benefits of a Wendy’s NNN Investment
The following are some of the benefits of buying a Wendy’s triple net lease property.
Rewards Without Risks
Triple net lease is inarguably the most secure investment opportunity in commercial real estate because it produces predictable and steady returns over time.
A tenant under the triple net lease is usually franchised like Wendy’s, making them financially stable and low-risk. The risk of re-leasing is generally lower compared to other lease types because tenants go for long-term leases.
More Profits Through Tax Deferment
An investment in a Wendy’s real estate for sale means you can use capital gains under the 1033 and 1031 tax-deferred exchange code to grow your money. Suppose your property appreciates enough for you to sell it; you won’t be required to pay taxes on your gain when you invest the profit into buying another property.
That way, you can buy more properties, your income will increase, and the newly acquired buildings will appreciate more, meaning more wealth. More so, you get to accumulate wealth without paying taxes each time you sell and make a profit.
Little to No Property Management Responsibility
One significant reason baby boomers, retirees, professionals, and every other person loves investing in Wendy’s NNN properties is because they don’t come with property maintenance and management obligations usually tied to owning a property.
Since tenants pay for the property’s insurance, taxes, and maintenance, they’re responsible for any expense with the building’s upkeep. They don’t have to wait for the owner before carrying out any maintenance task.
Thus, the NNN investor is absolved of property management duty and has much time to focus on other engaging ventures.
About Wendy’s NNN Lease Terms
Wendy’s is inarguably one of the biggest quick-service restaurant (QSR) chains famous for their hamburger. As an investment option, Wendy’s NNN real estate leases are attractive because Wendy’s is a Fortune 500 company with about 6,828 restaurants worldwide. However, 6,467 of the stores are franchised.
Wendy’s high number of franchised stores is because, over the years, it deliberately changed its company-operated units to franchises. Thus, various guarantors and lease agreements under Wendy’s banner lead to varying cap rates and lease terms depending on the sale, operator strength, and store size of a particular location.
However, Wendy’s franchise generally operates a 20 years lease term with a five to ten percent increase option every five years. Wendy’s are mostly built on a 0.5 to 1.0 acre of land and occupies 3,000 square foot with a drive-thru window.
Wendy’s is a famous quick-service restaurant business that prefers operating, developing, and franchising its restaurants. The revenues from the company are from four primary sources: sales of kids’ meal promotional items and bakery items to its franchises, sales from the company-operated restaurants, upfront franchise fees for each unit opened, and franchise royalties regularly received from all Wendy’s franchisees.
A standard Wendy’s restaurant offers a traditional menu that features chicken breast filet wraps and sandwiches with hamburgers, prepared according to the customer’s condiment choice.
Wendy’s also offer baked French fried potatoes, soft drinks, chicken nuggets, floats, kids’ meals, frosty desserts, freshly prepared salads, milk, and chili.
Thus, Wendy’s real estate for sale is a reputable and creditworthy investment option for investors that seek to enjoy the benefits that come with buying triple net properties
There’s a low chance of Wendy’s facing bankruptcy and inability to pay rent. Thus, they’re a sought-after investment option for seasoned NNN investors.
Pros of Wendy’s NNN Lease
- Favorable triple net leases with significant increases
- Heavy advertising of franchises to improve brand penetration and image
- Higher cap rates
Cons of Wendy’s NNN Lease
- Some leases don’t need sales reporting
- Compulsory sales history review at the subject location
- Monitors franchisor performance across all locations
- Non-investment grade credit
NNN or triple net lease properties have become ideal options for investors who desire a relatively low-risk investment with a steady income return. Due to its long-term lease of about 10 to 20 years with contractual rent escalation, investors enjoy a long-term stable income and zero property management responsibility.
More so, as an investor, you don’t need to worry about vacancy factors, leasing fees, and tenant improvement costs while enjoying the property’s capital appreciation. Most importantly, you can always sell the appreciated property and invest it into another NNN investment without paying any tax from your profit through a 1031 tax-deferred exchange.
Suppose you’ll love to enjoy all these benefits like other seasoned triple net investors, contact Buy NNN Properties today to see available listings of Wendy’s and other QSRs, depending on your budget.