STNL Property InvestmentsMarch 2, 2022
A Single Tenant Net Lease property (also known as “Net Lease”, “STNL” or “NNN”) refers to a property which is 100 percent leased to one tenant with a lease structure in which the tenant is responsible for all property-related expenses, leaving the landlord with minimal responsibilities. STNL properties are a popular choice for individuals who wish to invest in real estate, but may not have the time or desire to actively manage a property.
One attractive feature of many STNL properties is long-term leases. These properties often have new lease terms of 10 to 25 years and typically provide multiple lease renewal options. Of course these properties may be bought or sold at any point during their lease, thus an investor may not realize the full lease term.
STNL tenants span across a variety of property types including office and industrial, but are most prevalent with retail properties including fast food restaurants, convenience stores, gas stations, and big box stores.
STNL properties provide a revenue stream through tenant rental income. But that is generally where the majority of any potential investment returns come from as you get closer to lease-end. The further you are into the lease (proximity to lease-end), the more difficult it is to realize appreciation over time with an STNL. The property is typically most valuable at acquisition (when the lease term is the longest).
STNL properties can provide a passive investment with long-term predictable cash flow. Although property risks can be partially mitigated by the strength of the tenant, NNN properties are still subject to all the risks associated with real estate investments.