Bonds Are Obsolete – Switch Property Investment To Net Lease And Its Benefits
What is Bond Investment?
Bonds are debt securities issued by government entities or companies for a certain period. The meaning of the bond itself is often referred to as an acknowledgment of debt or debentures only. In the sense of bonds, the issuer of the debt means admitting that he has owed the buyer of the bonds following the agreed maturity time.
Simply put, bond issuers are debtors, while bond buyers are creditors or investors. The payment that must be repaid is the principal debt plus tax. In bonds, the term tax is more often referred to as a coupon.
Disadvantages of Bond Investment
Bonds Have Lots of Disadvantages, Here are the Disadvantages
1. Can not be withdrawn at any time
Unlike the case with net leases, bonds cannot be disbursed at any time when you need emergency funds. Thus, you should think about it first when you want to start investing in bonds.
2. Risk of money not coming back
One of the downsides of bond investing is that your money runs the risk of not getting your money back. If the company you invest in suffers a loss, certainly, the investor will not make a profit, even the entire principal debt will not return.
3. Interest rate risk
The interest rate risk of bonds is higher when compared to Net Lease. Interest rates will affect the value of bonds directly. If you sell it before the expiration date, you will incur a loss.
What is net lease investment?
The term net lease is nothing but a contractual agreement under which the lessee pays some/all taxes, insurance fees, and maintenance costs for the property other than the lease. Most Net Lease Are Used For Commercial Real Estate. In the purest kind of a net lease, the lessee is expected to spend all expenses related to a Property as in the event the lessee had been the genuine owner. Net leases are very different from bonds, in that the lessee pays a fixed rental fee while the owner is responsible for other expenses. You must be wondering, Where can you find nnn properties for sale? By clicking on the previous link you can find nnn Lease for sale.
- In a net lease, the lessee pays part or all of the taxes, insurance costs, and property maintenance costs other than the lease.
- net leases are typically used in the commercial real estate sector.
- Landlords use net leases when they don’t want to deal with the hassles associated with ongoing maintenance and other costs (such as bonds).
- Types of net leases include single net leases, double net leases, and triple net leases.
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Benefits of Investing in a Net Lease Property
Long Term Occupancy
Most Net lease agreements are structured to offer tenants long-term (up to 20 years) occupancy. This is advantageous for the landlord as it eliminates the risk and loss of property piled up among the tenants. Here are other benefits:
Because the tenant is responsible for almost all costs associated with the property — from taxes and insurance to routine maintenance costs — a Net Lease agreement is a low-risk investment for an investor.
Consistent Income Stream
A consistent source of income for investors can be obtained from net leases. Net Lease is prepared to add up a consistent monthly rental over the extended period. Plus, any unknown property charges are passed on towards the tenant, assisting to shield against any risk in the investment.
Net leased properties are often added to investment portfolios as a low-risk, conservative strategy to create more equity. In addition, investors may decide to sell properties when the market is at its peak, the population is soaring, or when they are ready to use the equity in their next investment.
Host Duty Reduction
With a net lease, you have almost no owner’s responsibility as a more conventional lease. That way, it won’t take a lot of money and time, so investors can do other businesses.
Long Term Business Footprint
Tenants who agree to long-term leases have the advantage of being able to create a recognizable and durable location for their business.
Normally, properties with net lease are located in accessible locations close to other well known corporations. This can help tenants gain traffic and exposure from customers visiting other businesses in the vicinity.
Since the lessee on a net lease is responsible for paying property taxes, they may be able to include this fee in their business expenses and derive some tax benefits for their business.