Single Tenant Net Lease Investment

February 23, 2023

When investing in commercial real estate, one of the best options available is a Single Tenant Net Lease (STNL) investment. An STNL investment is a commercial real estate investment that involves purchasing a property and leasing it to a single tenant on a long-term basis.

A Single Tenant Net Lease is a lease agreement in which a single tenant leases an entire property from the owner. The tenant is responsible for paying all the property-related expenses, including taxes, insurance, and maintenance. The landlord, in turn, receives a regular rental income without having to worry about any additional costs or responsibilities.

Anastasia Lozhkina a STNL Retail Investment Sales Advisor with Caton Commercial highlights why STNL properties are a smart investment below.

Consistent Income Stream: With an STNL investment, you can enjoy a consistent income stream for the entire lease term, which is typically 10-15 years or longer. This makes it an attractive option for investors who are looking for a predictable and steady source of income.

Low Risk: STNL properties are considered a low-risk investment because the tenant is responsible for all the property-related expenses, including maintenance, repairs, and property taxes. This means that as an investor, you don’t have to worry about unexpected expenses, making it an ideal option for those who are risk-averse.

High-Quality Tenants: These tenants are typically considered “investment-grade” tenants, meaning they have a credit rating of BBB- or higher. Examples of investment-grade tenants for STNL properties include national retail chains, grocery stores, banks, and large corporations. This makes STNL properties an attractive option for investors who are looking for quality tenants and minimal vacancy risk. In addition to investment-grade tenants, STNL investors may also consider healthcare tenants, such as hospitals, medical offices, and urgent care centers, as they are also typically considered stable and reliable.

Prime Location: STNL properties are usually located in prime locations, such as near hospitals and medical centers. This location advantage can help medical professionals diversify their investment portfolio while still having a strong connection to their profession.

There are a few cons to investing in STNL properties as outlined below.

Limited Appreciation Potential: The long-term lease agreements that come with STNL properties can limit the potential for property appreciation. This means that the value of the property may not increase significantly during the lease term.

High Initial Investment: STNL properties typically require a large initial investment, which can be a barrier to entry for some investors.

While STNL properties may have limited appreciation potential and require a high initial investment, the high-quality tenants and long-term lease agreements make it a worthwhile investment in the long run.  STNL properties are a smart investment opportunity for investors who are looking for a predictable and steady source of income with low risk.

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