NNN Properties For Sale in New York
When many people think of New York, they think of the bustling island of Manhattan, where New York City’s financial district is located. But the state of New York isn’t all skyscrapers and yellow taxicabs. With diverse environments and communities that range from the densely populated “Big Apple” to rural towns like Saratoga Springs, New York is home to plenty of commercial real estate opportunities for anyone who’s willing to do a little looking.
If you’re searching for a property in the highly trafficked suburban shopping corridors that many NNN lease tenants prefer, you’ll definitely want to look outside NYC. Consider opportunities in and around Buffalo, Long Island, Rochester, and other areas that boast high per capita income and roomier lots to allow for parking.
NNN Properties in New York Overview
While New York state boasts numerous different locations that are optimal for NNN lease tenants, it’s important to also consider that the state has relatively high tax rates when compared with those in the rest of the country. In fact, NPR reported that New York actually has the highest tax burden of any U.S. state.
Tax burden is a term that refers to the portion of a person’s income that goes toward taxes. Usually, this figure is calculated through a combination of property tax, income tax, and sales tax. Coming at 12.47%, New York clocked in at number one. But the tax rates may be offset by the burgeoning commercial real estate opportunities in this state.
| Triple Net Properties in New York Overview | |
| State population | 19,840,000 people |
| Number of business entities | 523,000 |
| Average NNN lease property cost | $2 million |
| Average cap rate | 4% |
| Corporate income tax rate | 6.5% - 7.25% |
| Personal income tax rate | 4% - 10.9% |
| Capital gains tax rate | 8.82% |
Common NNN Lease Tenants in New York
New York is home to a wide range of NNN lease tenants, but there are a few well-known tenants that stand out among the ranks. In the drugstore and pharmaceuticals industry, Walgreens is a common option – it sometimes goes by the name “Duane Reade” in New York City. Although Walgreens Boots Alliance has owned Duane Reade for years, it has kept the name in some Manhattan stores due to its connection to New York’s history.
Other popular NNN tenants in New York include Firestone, Burger King, and Dollar General. With its focus on tertiary markets and openness to standalone locations in rural areas, Dollar General has taken a foothold in New York in regions outside the New York City metropolitan area. There are also 555 Dollar General stores in the state.
Why Choose a Net Lease Over a Gross Lease When Investing in Commercial Real Estate?
Net leases lessen the responsibilities that commercial real estate investors and landlords must handle, making real estate a much more passive investment. For that reason, commercial real estate investors are often looking for a net lease instead of a gross lease. These two lease types are often seen as opposites.
A gross lease states a fixed amount that a tenant must pay to utilize a given space. That number will never change due to operating expenses, as landlords generally cover those costs. Net leases, on the other hand, let landlords hand operating expenses over to tenants.
There are three tiers of net leases that commercial real estate investors may want to consider: single, double, and triple. These are also referred to as N, NN, and NNN leases. With each increasing level, the landlord can pass more and more expenses to the tenant, meaning investors see less risk as the tiers increase.
Single net (N) leases hold the tenant accountable for only property taxes in addition to the cost of rent. For N leases, the landlord is responsible for insurance, maintenance, repairs, and utilities. N leases are less common for commercial real estate. Double net (NN) leases and triple net (NNN) leases are much more common.
What Types of Net Leases Are Common in New York?
New York commercial real estate tenants have signed many different types of leases, but NN and NNN are by far the most common. Investors often prefer the latter due to its risk-reducing nature and its lower levels of responsibility.
NNN leases are generally the most attractive option for property owners and investors. That’s because they hold the tenant accountable for paying operating expenses and costs related to the property, which can include insurance premiums, property taxes, and structural maintenance or repair costs. Those items can add up fast, and when investors have to pay them, their returns will be less consistent.
NN, or double net, leases are a slightly less attractive proposition. That’s because, with an NN lease, the tenant is responsible for only rent, insurance, and property taxes – in other words, the owner is on the hook for structural maintenance and repairs. Those types of repairs can be pricey and urgent when the need arises, getting in the way of predictable income.
It’s crucial to keep in mind, however, that with an NNN lease, a tenant will often pay a lower base rent since they’re responsible for all of those operating costs. That said, because NNN leases reduce the responsibilities related to property management by passing the majority of responsibilities onto the tenant, they remain preferable in many cases.
How to Evaluate a Net Lease for Sale in New York
When evaluating a net lease for sale in the state of New York, you’ll want to assess both property value and tenant strength. Especially when you’re reviewing single-tenant properties, like the ones many net lease tenants prefer, your tenant concentration can be only either 100% or 0%. Basically, you’ll be generating 100% of your potential cash flow or none of it.
In order to ensure that your NNN lease pans out and the property stays occupied, you’ll want to take measures to confirm that the property you choose meets the qualifications that your tenant prefers in its locations – for instance, Walgreens looks for hard-corner locations with easy ingress and egress and, ideally, room for a parking lot.
One great benefit of NNN lease investing is that these tenants are usually investment-grade companies with strong balance sheets – and in some cases, rent is even backed by a corporate guarantee. That means you can trust that payments will arrive on time each month, and you won’t have to chase down your tenants to get your next check.
What Makes New York an Attractive State for NNN Leases?
With a wide range of environments and investment opportunities, New York is a mecca of opportunity for any savvy commercial real estate investor. Its immense population and ever-growing urban centers bring more and more people to the state every year. New York is the fourth most populous state in the country, trailing behind California, Texas, and Florida.
With population comes opportunity. While about 40% of New York’s population is located within New York City’s five boroughs, the rest of the state is full of suburbs and more rural areas that are hotspots for commercial activity. Many NNN tenants are keen to take advantage of the high-income consumers around the city and beyond.
New York’s high per-capita income at $71,440 on average, clocks in as the nation’s third-highest) coupled with its large population, makes it an excellent state for NNN lease investors.
