NNN Cap Rates in Virginia
The location of a commercial property influences current cap rates. Demand drives prices, and the nearer a property is to areas with lots of traffic, the higher the price. Demographics like major industries, employment rates and median household income all affect the risk associated with investing in a property.
We often reply by taking a look at what other similar properties in the area are going for and their cap rate, as this helps determine whether yours is priced reasonably based on the business, market, and location. By looking at the average cap rates over the years for a certain industry, this can also help provide an idea of whether your NNN Cap Rate in VA
General Rule of Thumb
As a general rule of thumb: the higher the cap rate, the more cash flow, and associated risk, then less expensive the property is. Additionally, the lower the cap rate, the safer the deal is — however, it’s going to be more expensive for the investor. For instance, if you have a tenant with strong credit, then the cap rate is likely to be lower around 4-5%. So while this means you may pay more for the property, you will probably have a more reliable tenant who is in it for the long term.
When a NNN lease property cap rate is 10% or above, this is usually for tenants who are less creditworthy and may not continue their lease once it has ended. An advisor for VA NNN Cap Rates at Avison Young is likely to suggest considering the chance that after the lease is over, you may run into a vacancy issue. Based on the location and how easy it may be to find another tenant, you may want to hold out for a tenant that doesn’t plan on moving after the lease is over.
Evaluating a Potential Tenant
Over recent years, our advisors at Avison Young Net Lease Group have been looking at NNN Cap Rates in Virginia and around the country. We have seen a shift in commercial real estate properties, both in how they are being used and what kind of companies are seeking these spaces. For example, a new tech company that hasn’t established creditworthiness, may still be more than capable to pay property expenses. When evaluating a potential tenant, we may suggest looking at the tenant’s type of business, the current market, where the revenue is coming from, and how long they plan on building their business in Virginia but also nationwide based on where you are looking to invest.
Establishing Terms of the Lease
Both the property location and the terms within the lease are crucially important. There are so many different varieties of net leases for commercial properties. As advisors for NNN Cap Rates in the VA area, we couldn’t emphasize more just how vital it is that you consider how the lease can perform throughout the duration of the contract timeframe. A poorly made lease with loopholes may result in a sudden vacancy or financially unreliable tenant who struggles to pay expenses for the NNN property.
Investors who are looking for their best options in NNN Investments as well as seeking an understanding of cap rates can look to our Net Lease Experts at Avison Young. We will help navigate you through the process and work with you to understand Virginia NNN Cap Rates or cap rates around the country or in your specific market — so please call us today for a free, no-obligation consultation! Start the process here.