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NNN Investing: Circle K Stores for Sale NNN Leases
An NNN (Triple Net Lease) is an agreement in real estate where the tenant or the lessee pays for property expenses such as insurance, repairs, and taxes. The rent charge for triple net leases is often lower due to the operating costs the tenant is covering. Property investors looking for low-risk investments often turn to triple net leases. The prospect of passing off operating costs to the tenants while still getting a steady income is quite appealing.
Advantages of NNN Leases
NNN leases offer the following advantages:
- Minimal Landlord Duties
The tenant is responsible for the building insurance, property taxes, and common area maintenance (the three nets), giving the landlord incentive to invest in many such properties. Landlords are also immune from future increments in maintenance costs since tenants bear them directly.
- Long-Term Tenancy
Triple net leases offer high revenue certainty. Tenants may take NNN properties on 10 to 30-year leases, so there’s little worry about finding new tenants to fill vacant units.
- Passive Income Source
NNN leases are one of the most dependable passive income sources. Tenants are usually reliable and will hold on to a lease for years. If you have a property manager, your only job will be handling tenant turnover and monthly rent checks.
An NNN lease is transferable between owners. You can hold a lease for a few years and flip it if you need the capital for another project.
Triple net leases are not without some drawbacks:
- Cap on Earnings
The agreed-upon lease determines how much you can earn. There is little to no possibility of increasing your income until the end of a lease, usually long-term.
- Higher Vacancy Risk
NNN properties are usually designed to meet specific tenant needs, so it can be challenging to find new tenants when an old one leaves the property.
Circle K Stores
Circle K is one of North America’s largest convenience stores chains and operates thousands of outlets worldwide. Circle K stores offer a wide variety of products on the go – coffee, fountain drinks, frozen food, groceries, and gasoline in some stores.
Circle K is currently owned by Alimentation Couche-Tard, North America’s largest convenience store operator. Alimentation Couche-Tard also operates Kangaroo Express, Mac’s, and On the Run stores.
Circle K was founded in 1951 but did not begin franchise operations until 1999. There are currently over 6000 Circle K selling stores in the US, and the chain has become one of the world’s most recognizable convenience store brands.
Franchises are joint ventures between business owners and individuals or groups in which the owner licenses its brand for a fee and royalty payments. Franchises offer aspiring business people access to already existing competitive markets like convenience stores and fast food.
The terms of a franchise contract are usually complicated and may vary for each franchisor-franchisee agreement. A contract may last anywhere from five to 30 years, with potential penalties if a party violates the terms.
Investing in a franchise offers certain advantages, such as an existing, working business model. Franchisees can leverage on a notable brand like Circle K though this is not necessarily a guarantee for success.
NNN investing: Circle K NNN Leases
Circle K NNN properties are highly sought-after leases. As a globally recognized brand, Circle K offers investors entirely passive NNN leases from a company with a track record of success.
Finding a Circle K store for sale may be one of the most straightforward real estate investments you can make. Circle K properties are typically located at intersections with high traffic, so there will almost always be tenants who want to lease your property. Other benefits of Circle K NNN leases include:
- Entirely passive investment with the possibility of periodic rental increases.
- A large number of stores means that you can easily find buyers for your property if you want to move on.
- Convenience stores offer accelerated depreciation on improvements which may qualify you for tax benefits.
How to Invest in Circle K NNN Leases
If you want to invest in a Circle K NNN lease, you may want to take the following steps:
- Decide How Much You Want to Earn
The location and type of property can significantly affect the cap rate and your earning potential. A convenience store located at an intersection with high traffic and strategic entry and exit points will be a money-spinner. It will get more patronage than one with relatively lower traffic.
- Get in Touch with a Realtor
Unless you have real estate investment expertise, it would be wise to consult a realtor for guidance. There are technicalities in the real estate sector that might be beyond you and put you at a disadvantage.
Ideally, you want to find a realtor who has been involved in Circle K store sales. A real estate agent with sufficient triple net leasing experience should suffice if you cannot find one on time.
- Sort out Your Finances
Unless you want to fund your investment with cash, you may wish to speak to lenders to see how much credit you can access. The ideal lender should be able to go nationwide with you. Dealing with financial issues on time allows you to close a deal as soon as it becomes available.
- Analyze Your Options and Make an Offer
You will no doubt find several Circle K stores for sale once you start looking. Create a physical or digital file for each store you find with why you should or shouldn’t invest in them. Contact your realtor to make a formal offer when you reach a decision.
- Thoroughly Check the Property and Occupant
If your bid is accepted, you may need to hire an inspector to go through the asset with a fine-tooth comb and return with a review. You should also review the details of the existing lease carefully. It would be best to allow your lawyers to go through the document and give you their submissions.
NNN investing: Final Thoughts
Circle K stores offer great NNN investment potential. Whether you are looking at Circle K gas stations for sale or regular convenience stores, you have an opportunity to earn passive income for a long time. Once you perform your due diligence and are satisfied with your projected earnings, there is no reason not to invest.