What Are the Typical Returns From Triple Net Leased Investments?

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The answer depends on how you evaluate your investment.

Capitalization Rates are the most common way to evaluate returns (take 1 year’s net income/purchase price). NNN leased investments currently average 5% to 8% capitalization rates depending on credit risk, location, and value of the income stream. With the ups and downs of the stock market and the recent turmoil in residential housing, more and more investors are seeking refuge in single tenant NNN leased real estate investments. This increased demand, coupled with low interest rates, has driven cap rates down over the past 10 years.

Internal rate of return (IRR) is the value of an investment over a period of time. Assuming over a specified period (usually 10 years) of income, appreciation, payment of debt (if any), resale value, cost of resale and discounting the numbers into today’s dollars, IRRs for NNN leased investments are usually 10%-14%. Yields from single tenant NNN leased real estate exceeded that of 10-year U.S. Treasury securities by 467 basis points as of November 2012.

Credit: Net Leased Real Properties, Inc/National RE Investor