Tenant Strength: How strong is the tenant, and what is the likelihood of a default? Tenants that are publically traded companies make it easier to ask this question, and tenants that are actually rated are the easiest to evaluate in this regard. However private companies and individual franchisees are more difficult to evaluate since financial information is often times limited. Regardless of whatever the tenant profile is, it is important to consider the tenants financial strength in order to better determine the overall risk of the investment.

Investment Figures:  When evaluating NNN investments, understanding present and returns is crucial. As a basis, the investor should take into account the capitalization rate, and how it compares to similar investments. The investor should also take into account rent increases, potential expenses (NN or Net investments), and potential costs associated with a lease renewal or re-tenanting upon expiration. The investor should also take into consideration financing expenses if the investment is to be financed.

Lease Terms:  With NNN investments, the focus is more on the tenant and lease, rather than the property itself. As a result, the investor should focus heavily on specific lease terms. Important examples include:  length of lease, rental rate, increase schedule, option schedule, expense responsibilities.

Tenant Industry: What industry is the tenant in? What are the trends of that industry, and what does the future hold? For example, could the tenant see some adverse effects from e-commerce?

Physical Location: One important consideration is the actual physical location of the property. This goes beyond demographics, because demographics strictly pertains to markets or regions. Therefore it is important to look at the actual location of a property and ask some important questions: What are the traffic counts? Is the property located in a retail corridor? How is the foot traffic? How is the visibility?

Demographics:   Having information on population, income levels,  and households is extremely important in understanding a properties underlying value and desirability. Demographics give the investors a lot of insight as to these factors surrounding the investment and is typically  presented based on a certain radius from the property.

Building Quality:  Although NNN investments often times require the tenant to handle all aspects of a properties repairs and maintenance needs, a buildings age, construction build, and layout are important factors in any investment. Once again we have to take into consideration a properties appeal to other potential tenants in the future

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