If you’re looking to make any form of investment, the first thing that’s bound to come into your mind is the risk and profit margins attached. With this in mind, many investors are turning towards real estate and, more specifically, QSR NNN Investments.
So, you’ve probably heard of a mcdonalds net lease, and you’re asking yourself how this real estate variation is a viable investment for new and existing investors? To start things off, you have to understand what QSRs are and how McDonald’s NNN for sale comes into the picture.
QSRs (Quick Service Restaurants), also known as fast food outlets, are focused on getting customers food as soon as possible. In the United States today, most people live on these offerings. With an increasing population, it’s easy to see why investors turn towards these structures for triple net (NNN) leases.
Known for its quick adaptability to varying conditions, this investment type, while increasing your real estate portfolio, grants individuals access to a convenient mode of passive income. In this article, we’ll be looking at the inner workings of NNN leases, why fast food NNNs are increasingly popular, and the risks involved.
What’s the Idea Behind Triple Net Leases?
While other forms of net leases are available to investors/landlords, triple net leases, also known as NNNs, rank high for more significant ROIs (Return on Investments). So, what’s the ideology behind this real estate variant?
Well, it’s simple. On these properties, tenants are responsible for taking care of every expense that emanates from that property. Costs here include taxes, maintenance fees, insurance, repairs, and rent.
By investing in these properties and becoming a landlord, you don’t need to supervise proceedings in your NNN daily, as you’re guaranteed to receive rent as long as there’s a contracted lease still active.
Due to the structural characteristics attached to NNN properties, you can draft a McDonald’s net lease that lasts for up to 10 years. In some cases, this timeframe is extended to 25 years, depending on the contract signed by the tenant.
With lease agreements, as long as the ones associated with NNN properties, the concern of new investors, most times, is the condition; it’ll be left in upon expiry. Since most tenants are likely to run businesses, they’ll keep it pristine to attract customers.
As a result, even though there might be a need for renovations when their lease expires, there’ll be nothing too major.
Why Are QSRs Regarded as Great NNN Properties?
QSRs have one thing that investors cherish the most – NUMBERS. As it stands, the United States is home to over 200,000 Quick Service Restaurants.
Now, the average American citizen spends around $1,200 on fast food outlets annually. What’s more? According to a recent study, 1 in 3 Americans consumes meals from QSRs daily.
While this might bring about some health concerns amongst the American populace, fast food NNNs are in high demand.
Asides from the numbers, the recent pandemic also showed that, come what may, people will still seek out ways to patronize their favorite fast-food restaurants. The effect? Investors searching for the best McDonald’s real estate deals to make positive dividends.
For perspective on what outlets US residents patronize the most, we researched and sifted out a QSR Magazine report as recent as 2020. Here are the QSRs that make up the top 10:
- Taco Bell
- Burger King
- Panera Bread
QSR NNN Properties: Risks That Might Crop Up
Look before you leap, they say. Everyone wants a soft landing in the real estate world, as it can be heartbreaking to see all you’ve worked for “go up in flames” in one instance.
While the numbers attached to QSRs might look tremendous and influence your decision to purchase a McDonald’s real estate company, you must know the risks involved. Life’s a game of chance, and so are real estate investments.
Some risks you might come across on QSR NNN Investments include:
When buying an NNN property of any kind, it’s either empty or occupied. If this structure houses a single tenant and they decide to move out for some reason, you as an investor will be left to shoulder the expenses created by your NNN.
At this time, you’ll want to lease this property out to another fast food service immediately. While this might look like a stress-free activity, prospective tenants might be skeptical about entering a lease agreement with you.
Why? It’s simple. They’re scared that the former occupant didn’t have good business on your QSR NNN property.
- Building Specialization
When you’re buying into a fast-food NNN, going with a property fitted with add-ons peculiar to QSRs is common. While you might get some traction with a fitting tenant, the tides might change years down the line.
How? Let’s say your present tenant’s lease expires, and you can’t re-lease that property to another tenant since they’re unwilling to go with a fast-food NNN for some reason.
Consequently, you might need to spend a large chunk of funds getting that NNN into a structure that matches the tenant’s preferences.
- Faux Sense of Safety With Publicly Traded Entities
Investors who don’t do comprehensive research on their incoming tenants might fall victim to corporate branding.
Although it’s common to think that your tenant might have the money to pay rent due to its affiliations with a publicly traded company like Wendy’s, Subway, or Domino’s, this isn’t always the case.
While the usual line of thought is that these entities are responsible for rent payments, many tenants are running subsidiaries using the company’s name.
Therefore, it’s crucial to stay abreast with information that could prevent you from making the wrong tenant selection.
Getting a McDonald’s net lease property has its merits. Despite the pandemic that had adverse effects on the US economy last year, QSRs, rather than dwindling, soared from strength to strength. Thus, if you wanted to make a financial commitment on a real estate investment, you might want to check out a McDonald’s net lease property.
While we’ve mentioned the risks involved, this shouldn’t scare you away as no investment is 100% certain. If you’d like to invest in a profitable NNN venture in 2021, find your dream property at buynnnproperties.