Where to invest the money? This is one of the difficult decisions we make in our life. You’ll find various investment options like forex, crypto, real estate and bonds.
Except for Bonds, all these traditional options are considered long term investments and may result in bankruptcy. When it comes to Bonds, it depends on your luck whether you get a profit in the long term or not.
Now the question arises: which one is the safest mode of investment? It got a simple answer: net lease property investments.
Net lease property is one of the beneficial options over traditional investment options.
This article will explain why investing in net lease properties is beneficial over traditional investment options.
What are net lease property investment options?
It is one of the safest investments where a buyer purchases a property from the seller. And the best thing is that the seller agrees to pay the expenses for a fixed period.
These expenses include taxes, insurance, maintenance costs and other costs related to the property. If you are looking to invest in a net lease property, you must know who is paying the expenses associated with the property because it can make a massive impact on your returns.
Types of Net lease property
Here are the three main types of net lease properties
1. Net lease property
Retail properties are known as net lease properties. The landlord will be responsible for paying the property taxes and maintenance costs related to the property.
However, the tenant will pay other expenses.
2. Double net lease property
A double net lease is the same as a net lease property. The only difference is that the tenant has to pay the maintenance cost of the HVAC system.
3. Triple net lease property
Triple nnn net lease is also the same as the double net lease property. In this property, the tenant has to pay the property taxes.
It is one of the beneficial and safest investment options among double and net lease property.
What are traditional investments?
It is a type of investment in which you put money into well-known assets with the expectations of capital appreciation, interest earnings and dividends.
Types of traditional investments
Here are some well-known assets that will allow you to invest your money.
- Real estate
- Stocks and shares
Why is investing in net lease properties beneficial over traditional investment options like bonds
This section will discuss the benefits of investing in net lease property over traditional inventions like bonds.
1. Tax benefits
Net lease properties will offer you tax benefits. Suppose you’re looking to buy a net lease property; the landlord has to pay the property taxes and maintenance costs related to the property.
2. Reducing the impact of market volatility
If you invest in different sectors and assets, it will minimise the impact of market volatility on your investments. You own investments across various funds, so the risk of owning specific industries will be lower.
Compared to traditional investment options like bonds, net lease properties possess lower volatility. The only reason behind this is that the rents are locked for long terms.
Moreover, they are also not susceptible to fluctuations in the stock market or interest rates.
3. Higher yields
The net lease property investment possesses higher yields than the 10-year treasury bond. Over the past several years, the yields have been rising steadily.
This is because many net lease properties have provisions that result in increased rent, usually tied to inflation.
As we mentioned before, investing in net lease properties is one of the safest invention options over traditional real estate options.
The reason behind this is that the cash flow is much more predictable in a net lease than in traditional investment options.
However, the tenant is responsible for paying all the operating expenses related to the property. It means that the tenant will have a vested interest in maintaining the property.
Compared to other investment options, the calibre of companies investing in triple net lease properties means overall creditworthiness increased. However, it also decreases the risk in terms of potential vacancies.
Why are traditional investment options outdated and net lease property investments in dominance?
Traditional investments are getting outdated because net lease properties offer a higher long-term income stream than most fixed-income investments.
During inflation, most people think that traditional investments like Bonds and CDs are not risk-free. Suppose inflation increases by 2% in the first year and 3% in the second year; your bond has to face a loss of about 5%.
In the case of net lease property, there is an increase in the rent more than the inflation rate. As a result, purchasing power is maintained.
So that’s what we have to say about why traditional investment options are getting outdated and net lease properties are in dominance these years.
Previously, bonds and other traditional investments were the most preferred investment options. But now, investing in net lease property has overpassed the traditional investment market.
We hope the information outlined in the article will help you know why investing in net lease property is beneficial over traditional investment options.