Restaurants are a favorite commercial property for many investors because:
- Tenants often sign a very long term, e.g. 20 years absolute triple net (NNN) leases. This means, besides the rent, tenants also pay for property taxes, insurance and all maintenance expenses. The only thing the investor has to pay is the mortgage, which in turn offers very predictable cash flow. There are either no or few landlord responsibilities because the tenant is responsible for maintenance. This allows the investor more time to do important thing in life, e.g. retire. All you do is take the rent check to the bank. This is one of the key benefits in investing in a restaurant or single-tenant property.
- Whether rich or poor, people need to eat. Americans are eating out more often as they are too busy to cook and cleanup the pots & pans afterwards which often is the worst part! According to the National Restaurant Association, the nation’s restaurant industry currently involves 937,000 restaurants and is expected to reach $537 billion in sales in 2007, compared to just $322 billion in 1997 and $200 billion in 1987 (in current dollars). In 2006, for every dollar Americans spend on foods, 48 cents were spent in restaurants. As long as there is civilization on earth, there will be restaurants and the investor will feel comfortable that the property is always in high demand.
- You know your tenants will take very good care of your property because it’s in their best interest to do so. Few customers, if any, want to go to a restaurant that has a filthy bathroom and/or trash in the parking lot.
However, restaurants are not created equal, from an investment viewpoint. Continue reading “A Complete Guide For Restaurant Real Estate Investments”