NNN properties, also known as triple-net lease properties, can be popular options for investors looking to execute a 1031 exchange. NNN properties are a type of commercial real estate investment where the tenant is responsible for paying the property’s operating expenses, including property taxes, insurance, and maintenance costs, in addition to the base rent. Several retail chains sell their buildings as triple-net lease (NNN) properties, offering investors the opportunity to acquire a property with a long-term lease in place. While the availability of NNN properties can vary over time and by location, here are some examples of retail chains known to have sold their buildings as NNN investments:
Walgreens: Walgreens, a nationwide pharmacy chain, has been known to sell their properties as NNN investments. They often enter long-term leases with investors, providing stable income streams for the property owners.
CVS Pharmacy: CVS Pharmacy, another prominent pharmacy chain with a vast network of locations, has also sold properties as NNN investments. They typically enter long-term lease agreements, making their buildings attractive options for investors seeking stable income.
Dollar General: Dollar General, a discount retail chain, has sold some of its properties as NNN investments. Their stores are often located in rural and suburban areas, and they have a consistent track record of growth and expansion.
Family Dollar: Family Dollar, a variety store chain, has offered some of its properties as NNN investments. Like Dollar General, their stores are typically found in rural and urban neighborhoods, serving as convenient shopping options for local communities.
AutoZone: AutoZone, a leading retailer of automotive parts and accessories, has occasionally sold properties under long-term NNN leases. Their stores are often strategically located near residential areas or along busy thoroughfares.
O’Reilly Auto Parts: O’Reilly Auto Parts, another well-known auto parts retailer, has been involved in selling properties as NNN investments. They operate a significant number of stores across the United States and may offer attractive investment opportunities for interested buyers.
Starbucks: Starbucks, the international coffeehouse chain, has occasionally sold its properties as NNN investments. With its widespread presence and strong brand recognition, Starbucks locations can be attractive options for investors seeking stable income from a well-established tenant.
McDonald’s: McDonald’s, one of the largest fast-food chains globally, has also sold some of its properties as NNN investments. McDonald’s locations often have high visibility and consistent customer demand, making them potentially appealing to investors.
Chick-fil-A: Chick-fil-A, a popular fast-food restaurant chain known for its chicken-based menu, has occasionally sold properties as NNN investments. The chain has a loyal customer base and has experienced significant growth in recent years.
Dollar Tree: Dollar Tree, a discount variety store chain, has sold properties under NNN leases. Their stores offer a range of inexpensive products and are typically located in various communities.
Panera Bread: Panera Bread, a bakery-cafe chain, has been involved in selling some of its properties as NNN investments. Known for its fresh and healthy food options, Panera Bread locations can attract customers seeking quick, casual dining experiences.
Buffalo Wild Wings: Part sports bar, part restaurant chain, BW3’s has sold properties under NNN lease agreements. With its focus on televised sports events and its popular menu offerings, Buffalo Wild Wings locations can be appealing to investors interested in the restaurant sector.
NNN properties typically involve single-tenant commercial buildings where the tenant is responsible for most expenses (property taxes, insurance, and maintenance), offer stable, long-term income streams with minimal management responsibilities. This stability and predictability make NNN properties particularly attractive for investors looking to exchange into a property with a secure and ongoing revenue source, while deferring taxes and potentially diversifying their investment portfolios. Additionally, the long-term leases associated with NNN properties provide a steady income that is often indexed for inflation, ensuring a consistent return on investment over time. Here is more detail on the specific advantages of NNN lease properties.
Tax-Deferred Exchange: NNN properties can serve as suitable replacement properties in a 1031 exchange. By identifying and acquiring an NNN property within the specified timeframe of a 1031 exchange, investors can defer capital gains taxes on the relinquished property’s sale. The rental income generated from the NNN property can provide ongoing cash flow while preserving the tax advantages of the 1031 exchange.
Passive Income Stream: NNN properties are often leased to national credit tenants, such as retail chains, pharmacies, or major corporations, who have a strong financial standing. These long-term lease agreements provide investors with a stable and predictable stream of passive income. The tenant’s responsibility for property expenses reduces the investor’s management obligations, making it an attractive option for those seeking a passive investment.
Reduced Management Responsibilities: One of the significant advantages of NNN properties is the reduced management responsibilities for the property owner. The tenant is responsible for most, if not all, of the property’s operating expenses, including maintenance, repairs, and property taxes. This allows investors to have a more hands-off approach to property management and focus on the financial aspects of the investment.
Diversification and Risk Mitigation: NNN properties often offer diversification benefits. Investors can consider properties across various sectors, such as retail, office, or industrial, and choose properties leased to different tenants in different locations. This diversification helps mitigate risks associated with a single property or tenant. However, it’s essential to conduct thorough due diligence on each NNN property to assess tenant creditworthiness, lease terms, and market conditions.
Long-Term Lease Stability: NNN properties typically have long-term lease agreements, often spanning 10 to 20 years or more. This lease stability provides investors with a predictable income stream over an extended period, reducing the risks associated with vacancies and tenant turnover.
Potential for Passive Investment Management: Some investors may prefer a more hands-on approach to managing their real estate investments. However, for those seeking a truly passive investment, NNN properties can be an attractive option. The lease structure and tenant responsibilities minimize the day-to-day management requirements, allowing investors to focus on other aspects of their investment portfolio or personal commitments.
As with any investment, it’s important to thoroughly evaluate NNN properties as potential replacement properties in a 1031 exchange. Conducting due diligence on the property, tenant, lease terms, location, and financials is crucial. Because not all NNN properties will work out on an exchange it’s important to identify a backup property or property option. Consulting with professionals experienced in NNN properties and 1031 exchanges, such as real estate brokers, tax advisors, and qualified intermediaries, can provide valuable guidance throughout the process.
Ready to start your search for your next NNN deal to swap into? Complete the 1031 Exchange Wizard or proceed to Browse Properties now.
