You’re a savvy real estate investor who is always looking for the next great opportunity. You may have heard that gas stations are a great investment, and you’re wondering if it’s something you should consider.
In this guide, we will walk you through everything you need to know about buying a gas station for lease. We’ll discuss what makes such a triple net lease (NNN) property a good investment, how to find the right property, and what to watch out for when making your purchase. So, let’s get started!
What Makes NNN Gas Stations a Sound Investment to Make
As you will be buying NNN gas stations for sale, this means that the tenant is responsible for most of the expenses in running the property. On top of paying the rent, they are entitled to handle the following.
- Property taxes
- Insurance
- Most of the property’s repair and maintenance costs
As an investor, this arrangement frees you from having to worry about these expenses, and it provides a degree of stability and predictability to your investment.
In addition, gas stations tend to be high-traffic locations with a captive audience, which helps to ensure that they will remain leased. Plus, gas prices are always fluctuating, so there’s the potential to make a good return on your investment if you buy at the right time.
All of these factors make gas station NNN properties a sound investment for savvy real estate investors like you.
What Are the Requirements for Buying an NNN Gas Station in the US
Unlike buying other types of investment properties, you will need to have a large sum of money available as a down payment. This is because gas station properties are typically quite expensive, and banks are often unwilling to finance more than 70% to 80% of the purchase price.
In addition, you will need to have experience running a gas station or another type of business. It’s also important to note that most gas station leases are for 15-20 years, so you’ll need to choose a creditworthy tenant that can provide you with a stable stream of income from rent in a long term.
How Much Do NNN Gas Stations Cost
As mentioned earlier, gas stations are typically quite expensive, with prices ranging from $500,000 to over $20 million. Of course, the price you’ll pay will depend on a number of factors, such as the location of the property, the size of the gas station, and the type of tenant that is leasing it.
To get an idea of how many are gas stations, let’s take a look at two of the most usual cases.
- A small gas station in a rural area with only one tenant might sell for around $500,000.
- A large gas station in a major city with multiple tenants could sell for $20 million or more.
As you can see, there is a wide range of prices that gas stations can fetch, so it’s important to do your research and find a property that fits your budget.
How to Look for NNN Gas Stations
The best way to find NNN properties with a high potential of return is by working with a real estate broker who specializes in such investments. With their help, you can quickly and easily check gas stations for lease options that match your criteria in terms of price, location, and more.
In addition, a broker can provide you with valuable insights into the gas station industry and help you to avoid making any costly mistakes.
Aside from using a broker, you can also try searching online for gas stations that are available for sale in your area or other areas you are interested to invest in. Just use relevant keywords, such as “gas station for lease near me” or “NNN gas stations for sale + city”, and you should get a good selection of results to choose from.
When searching online, it’s important to remember that gas stations are often listed under a variety of different names, such as “convenience store” or “service station”. So, be sure to keep an open mind and don’t limit your search to only one type of keyword.
Picking the Right NNN Gas Station for Sale
Now that you know the requirements, cost, and the best way of buying a gas station for lease, it is time to start searching for properties. Here are the most important factors to keep in mind.
Location
A good gas station to buy should be located in a high-traffic area, such as near a highway exit or a major intersection. It should also be situated close to other businesses, such as restaurants, as this will help to attract more customers.
When assessing the location, you should also consider the demographics of the surrounding area. For example, if you’re looking to target business commuters, then it might make sense to buy a gas station near an office park or industrial zone.
On the other hand, if you’re aiming for families with children, then it would be better to choose a property that’s situated near a residential area or a school.
Tenant Creditworthiness
Ideally, the gas station that you buy should already be leased out to reputable brands. These tenants will have the financial resources to pay their rent on time and maintain the gas station to a high standard.
If you’re buying a commercial gas station that’s not leased out, then you’ll need to find a tenant yourself. In this case, it’s important to do your due diligence and make sure that they have the necessary experience in running a gas station and that they are financially sound.
The last thing you want is for your tenant to default on their lease agreement, as this could leave you with an empty gas station and no income.
Cap Rate
The cap rate is a measure of the return on investment for a gas station. To calculate it, you simply take the net operating income (NOI) and divide it by the purchase price.
For example, if an existing gas station has an NOI of $100,000 and it’s being sold for $500,000, then the cap rate would be 20%.
Ideally, you should look for properties with a high cap rate, as this indicates that they are a good investment. However, you should also beware of properties with extraordinarily high cap rates, as this could be a sign that something is not quite right.
Condition of the Property
Of course, it’s important to assess the condition of the property. After all, you don’t want to buy a gas station that needs extensive repairs or renovations down the road.
Ideally, you should try to find a property that’s in good condition and doesn’t require any major work. However, if you consider one that needs some work, then you should factor this into your offer price.
Moreover, you should also make sure that the property has all the necessary environmental approvals in place. Remember—it could be very costly and time-consuming to get these documents.
What to Watch Out for When Making Your Purchase
When buying an NNN gas station, there are a few things that you need to watch out for.
First, you need to be sure that the property is located in a safe area. This is important because it will determine how easy it is to lease the gas station out and how much rent you can charge.
The second thing to look out for is environmental contamination. This is a common problem with gas stations, and it can be expensive to clean up.
Finally, you should also make sure that it has a good reputation. This is important to ensure you are getting the best revenue you can expect from this type of business.
Conclusion
Without a doubt, owning an NNN gas station is a highly lucrative way to earn passive income through real estate. However, it’s important to remember that not all properties are the same. With all the information provided in this article, you should now be off to a good start in finding a gas station for lease that matches your investment goals.
For more useful tips on real estate and business, feel free to check out the rest of our articles!
Leave a comment