When it comes to real estate investment, some of the best properties that you can buy are those under a triple net lease (NNN). This type of lease will provide you with a steady stream of passive income while requiring only minimal responsibilities on the part of the landlord.
However, to ensure you get the most returns from such a type of property, you should only buy one with a creditworthy tenant. With that said, you can look into Tractor Supply investment properties.
A company that started as a mail-order tractor parts supplier, Tractor Supply (Tractor Supply Co.) has grown into one of the leading providers of lifestyle and agricultural products in the US, selling a wide variety of items from casual clothes and animal care supplies to gardening tools and farming equipment.
Today, the company is seeing yearly sales revenues of almost $7 billion, mostly from selling its primary products, such as mechanical tractor parts, power equipment and tools, generators, and landscaping solutions.
They also already have more than 1,600 retail locations in 49 states, with a number of Tractor Supply investment properties offered to investors who want to delve into the company’s business and earn handsome income for the long term.
Before you invest in any NNN Tractor Supply for sale, it would make sense to fully understand what type of lease this store has.
By basic definition, a triple net lease, or commonly known as NNN, is a lease agreement on a property where the tenant is responsible for the payment of most expenses incurred in running the property. These include building insurance, real estate tax, and maintenance costs, on top of the rent and utilities. However, as these costs are handled by the tenant, the rental rates of an NNN property are generally lower than that of other commercial rental properties.
Nonetheless, NNN properties only require minimal responsibilities from the landlord. Also, they come with relatively low risk. The typical lease term is also long, with some lasting up to 20 years, which means that you can expect a steady source of passive income. These perks and more make NNN properties attractive to investors today.
Benefits of Investing in NNN Tractor Supply Properties
Owning one of the NNN Tractor Supply Co stores will engage you in a business with superb yields and strong growth potential. According to a report by Yahoo! Finance, the company maintains a good position for growth, thanks to the high demand for seasonal products and everyday merchandise that the company sells. Driven by this factor, the company saw great results for the second quarter of 2021.
Apart from that, Tractor Supply also has strong projections, with its management team raising its view for the said year. Specifically, they expect this year’s net sales to hit more than $12 billion, which will outperform the previous year’s net sales of $11.7 billion. As for the net income, the company expects to see $895-$930 million.
Moreover, the company is also planning to expand its store base and incorporate some new technologies to attract more customers. This is part of the company’s overall plan to improve sales and grow every quarter. For this year alone, it is in the process of opening 80 new stores.
Based on these expectations and developments, investing in Tractor Supply NNN stores is a wise move to make this year and onwards.
While Tractor Supply real estate for sale is a great investment option in itself, there are still some elements that separate the best properties from the good ones. Here are important things to keep in mind during your search.
The best Tractor Supply store to buy should be in a highly accessible location with sufficient road access where customers can easily load up their items. Better yet, it should have its own parking space.
Apart from that, it would be beneficial if it is close to other prime establishments, as these places help attract more customers to your store.
When buying NNN properties, a high cap rate means that you are saving money on your purchase, as the property should be cheaper. Apart from that, the cap rate also reflects the profitability of the property. So, the higher it is, the quicker it will be for you to get your return on investment.
As for Tractor Supply stores, they have an average cap rate of 6.12%, which is one of the highest among NNN properties you will find today.
To compute the exact cap rate of the property you are buying, you use this quick formula:
Capitalization Rate = Net Operating Income / Purchase Price
As a general rule of thumb, the longer the lease term of a property, the better. After all, it ensures long-term income with rental increases at certain points in time.
A long lease term also eliminates the hassle of finding new tenants from time to time.
Of course, the property that you should buy must not have any structural or environmental issues. Make no mistake, even a small problem with its design or with zoning can negatively affect your entire investment.
So, before proceeding with the purchase, make sure you have checked the property in person, as well as the title and other documents that come with it.
As one of the most successful businesses in the US, it would be safe to say that Tractor Supply investment properties are some of the best options for real estate investors today. However, keep in mind that not all of their properties offer the same revenue potential. So, take the time to assess the properties that you are interested in and choose one that will give you the best value for money.
You can also tap on the expertise of an NNN advisor, especially when you are new to this type of investment. These professionals will surely be able to guide you through the buying process and help you land on a property that best suits your investment goals. For more interesting reads about business and real estate, check out our other articles!