Single-tenant net lease (STNL) properties, such as a quick-service restaurant, auto parts store, pharmacy, dollar store, urgent care or bank branch, are a favorite of investors who want income without day-to-day management. In a triple-net (NNN) lease, the tenant pays property taxes, insurance and maintenance in addition to rent.
But “passive” doesn’t mean “risk-free.” Here is what we evaluate.
1. Tenant credit
Who signs the lease matters. A corporate guarantee from a large, investment-grade company is very different from a franchisee entity with a handful of locations. Review financials where available and understand who you can pursue if rent stops.
2. Lease term and structure
- Remaining term: longer terms reduce near-term vacancy risk.
- Rent increases: flat leases lose value to inflation; periodic bumps matter.
- Renewal options: who controls them, and at what rent.
- Landlord responsibilities: many “NNN” leases still leave roof, structure or parking lot obligations with the landlord. Some are “NN” or “modified.”
3. Real estate fundamentals
Ask what happens if the tenant leaves:
- Is the location strong (traffic counts, visibility, access, demographics)?
- Is rent at, above or below market?
- Could another tenant use the building, or is it highly specialized?
- What is the land worth on its own?
The best net-lease investments are good real estate first and good leases second.
4. Property taxes in Texas
Even though the tenant pays taxes, rising assessments can make the occupancy cost uncompetitive and affect renewals. Understand the tax history. See our property tax protest guide.
5. Pricing and cap rates
Net-lease pricing is driven by tenant credit, term, location and the interest-rate environment. Compare against similar tenants and lease structures, not just the asking cap rate. Read cap rates explained.
6. Houston-specific diligence
- Floodplain and flood history.
- Access changes from TxDOT projects.
- Deed restrictions and exclusives in adjacent centers.
- Environmental history for gas stations, auto service and dry cleaners.
NNN and 1031 exchanges
Net-lease properties are common 1031 replacement assets because they are easy to identify and close within exchange deadlines. Read our Houston 1031 exchange guide.
Frequently asked questions
Is an NNN property truly passive?
Mostly, but landlords may still be responsible for roof, structure or parking. Read the lease carefully.
What happens if an NNN tenant leaves?
You’re responsible for all costs until you re-lease. Location quality and re-leasing potential protect you.
Are NNN properties good for 1031 exchanges?
Yes. They’re commonly used because they’re easy to identify and close within exchange deadlines.
How we help
We underwrite net-lease properties for investors and help sellers position them for the 1031 buyer pool. Learn about our retail and investor services.
Have a deal or question in mind?
Talk it through with Apurva. A 20-minute call is usually enough to know your next step.
