FAQ

A net lease property is a building leased to a tenant, often a national brand, where the tenant pays the rent plus the property taxes, insurance and maintenance. In a triple net (NNN) lease the tenant pays all three. In an absolute NNN lease the tenant also covers the roof, structure and parking lot, so the owner has almost nothing to manage.

Investors buy these properties for steady, mostly hands-off income. The value of the property comes from the lease, not just the dirt.

With a ground lease, you lease only the land. The tenant pays to build its own store and owns the building during the lease. When the lease ends, the building usually goes to the landowner. Ground leases carry less risk for the landowner, so investors often pay a lower cap rate (a higher price) for them.

With a building lease (sometimes called a build-to-suit), the landowner or developer pays for the building and leases the land and building together. The rent is higher because it covers the construction cost.

The cap rate (capitalization rate) is the yearly rent divided by the price. Investors use it to price net lease properties.

Value = yearly rent / cap rate. For example, $150,000 a year in rent at a 6.00% cap rate is worth about $2.5 million. A lower cap rate means a higher price. Strong brands, corporate guarantees, long leases and good locations get lower cap rates.

1. Find land that fits what a brand is looking for, at the right price.
2. The brand signs a 10-20 year lease (or ground lease) before anything is built.
3. Get the site approved and build the store.
4. Once it is built and open, sell it to an investor at a cap rate, or do a cash-out refinance and keep it.

See the full walk-through on our Net Lease Creator.

Maybe. Drive-thru coffee, chicken, quick-service restaurants, auto parts, tire and dollar stores are all opening new locations, and many of them need small pads of about half an acre to a few acres on busy roads.

Call us at 1-760-392-1525 with the address or parcel number. If it fits a brand we are working with, we can buy it, lease it, or partner with you to turn it into a store.

• Traffic and visibility: a busy road where drivers can see the sign early.
• Easy in, easy out: good access, ideally near a traffic light, plus room for the drive-thru line to stack without backing into the road.
• Right size: often about 0.5 to 1.5 acres, depending on the brand.
• Good neighbors: near grocery stores, Walmart, Target, schools and other busy shops.
• Utilities and zoning: water, sewer and power at the site, and zoning that allows a drive-thru.
• Right side of the road: coffee brands want the morning-commute side; dinner brands often want the evening side.

A build-to-suit is when a developer or landowner builds a store to a brand’s exact plans, and the brand signs a long lease before construction starts. The lease is what makes it possible to get construction financing and later sell the finished property to an investor.

Some leases are guaranteed by the brand’s corporate company. Others are signed by a franchisee, a local business that runs the stores. Investors see a corporate guarantee as safer, so those properties usually sell at lower cap rates (higher prices). Franchisee leases from strong, experienced operators still sell well, usually at somewhat higher cap rates.

An LOI (letter of intent) is a short, mostly non-binding letter that lays out the main deal terms, like price or rent, lease length, who pays for what, and the timeline. Once both sides agree on the LOI, the lawyers write the full purchase agreement or lease.

Common checks include a survey (often an ALTA survey), a title report, zoning and site plan review, utility availability, a Phase I environmental report, soil (geotechnical) testing, traffic and access permits, and checking for wetlands or flood zones. Brands often have their own checklist too.