So, you are interested in investing in triple net lease (NNN) auto body shops. Well, that is a great idea! Not only that automotive parts and repair services are always in demand, but you can also benefit from the fewer landlord responsibilities and long-term appreciation associated with this type of asset.
However, with the many available options out there, how will you know you are buying the right property? Sure enough, this task can quickly become overwhelming, especially when you are doing it online.
But there is no need to fret—we are here to help!
In this guide, we will provide you with essential information to assist you in finding and evaluating potential auto body shops for lease online.
We will cover ways to assess properties and offer some tips on how to make the buying process seamless and easier for you.
Table of Contents
An Outlook for the Automotive Parts and Services Industry
Before you start buying an auto body shop for sale, it is essential to have a good understanding of the automotive parts and services industry, first.
After all, you would want to invest in a trade that will not only bring in a steady income but will also be profitable in the long run. Fortunately, the outlook for this industry looks promising.
According to research by IBISWorld, the auto parts retail sector’s revenue has been growing at a compound annual growth rate (CAGR) of 11.5% in recent years and is expected to hit $11.7 billion in sales in 2023. Currently, the industry is worth $389 billion in the US alone.
This growth is driven by the strong demand for car repair services due to the rising number of vehicles on the road.
With more cars in circulation, people have to service their vehicles more frequently than before, and they are seeking out professional auto parts and service shops for help.
In addition, the continuous advancement of technology is improving car efficiency and providing better safety features.
This means that consumers can now buy more reliable cars than before. That said, there is also a growing demand for auto mechanics who specialize in certain vehicle repairs or maintenance processes that require skill and experience.
Last but not least, the economic environment has also been favorable for the industry. The unemployment rate is low, which means people have more money to spend on their cars.
All of these trends mean that buying automotive businesses for sale can be a wise investment strategy.
5 Brilliant Tips for Searching Auto Body Shops for Lease Online
While the industry is booming and seeing favorable growth prospects, there is still a need for investors to be prudent when looking for an auto body shop for lease. Here are some tips to help you in your search.
1. Research the Creditworthiness of the Tenant
When you browse auto body shops for lease online, the first thing that you should do is research the creditworthiness of the tenant.
This is important because, if the property is being rented by a business that cannot pay its rent on time, then you could end up being burdened with a financial headache. Or worse, you could end up with a vacant property.
When doing your due diligence, make sure to call the current owner or their seller’s agent to ask about the tenant’s financial standing.
You should also request copies of the tenant’s credit report and financial statements to verify their information.
It would also be wise to read reviews from other landlords who currently own properties that are leased by the same tenant.
By doing so, you can gain insight into what the tenant is like as a renter and if they have a good payment history.
Leading Automotive Parts and Service Tenants in the NNN Sector
To ensure you are only dealing with reliable NNN tenants in this industry, you should look for the most reputable businesses that offer a good automotive franchise for sale. Here are some of them.
- O’Reilly Auto Parts
- Firestone Complete Auto Care
- Advance Auto Parts
- Take 5 Oil Change
- Jiffy LubeBrakes Plus
With these businesses, you are assured of a tenant that will pay their rent on time. Plus, you can also benefit from the positive reputation and branding that comes with leasing to a well-known auto parts shop!
2. Assess the Location
When searching for auto body shops for lease online, you should consider one that is situated in a desirable location as far as this type of business is concerned.
Ideally, it should be on a busy thoroughfare or near plenty of anchor establishments. This means that your auto body shop will have more chances of success since there is a larger population to draw customers from.
You should also check how accessible the property is. Do its roads have easy access from major highways? Is there plenty of parking?
These are important questions to consider as a prospective NNN investor because they can impact the value of your property in the future.
Lastly, you have the zoning regulations. Being aware of these policies will be very helpful if you are planning to expand your property in the future.
Perhaps, you want to add more services or even build another retail space. So, make sure that your chosen location allows these things.
3. Determine the Cap Rate
The capitalization rate is one of the most important metrics used to measure the potential return on investment (ROI) from an auto repair shop for sale.
You easily calculate it by dividing the property’s net operating income by how much you pay for it for the purchase.
So, for instance, if you pay $500,000 for the property and it generates $50,000 in net operating income annually, then its cap rate is 10%.
Normally speaking, the higher the cap rate, the better. It means that you will earn more on your investment.
However, it would also entail that such an investment might also come with higher risks. So, you should re-evaluate your risk tolerance before committing to a purchase.
It is also worth mentioning that when buying properties online, it can be difficult to determine their true value.
However, there are ways for you to get an estimate of what an auto body shop for sale would cost.
For example, you can research comparable sales in the area and use those numbers to get an idea of the price range that you can expect.
4. Learn About the Condition of the Property
As investors in a car dealership for sale would do, you should also make sure you are buying a property that is still in excellent condition.
This prevents you from needing to pay for costly repairs and maintenance down the line.
However, it can be difficult to exactly know the condition of a property by just looking at the listing.
One way to go about it is to ask the current owner or their agent if they can send you some updated photographs and videos of the property.
This gives you a better view of its layout and facilities and allows you to take note of any issues that need attention.
It would also be wise to look into the property’s age as well as its building materials. Sometimes, older properties with outdated construction may require more maintenance than those made with newer materials.
But still, you should never purchase a certain property without inspecting it in person. This is also a good opportunity to ask questions and make sure that it is suitable for your needs.
It would be best to hire an appraiser or inspector who can provide you with a detailed report of the property’s condition.
5. Know the Current Lease Term and Renewal Arrangements
Lease terms and renewal options are fundamental components of NNN investing. So, make sure you are familiar with the lease when researching auto body shops for lease online.
Find out the length of the current lease and its renewal arrangement.
If it is a long-term lease, then find out if there is an escalator clause that will allow for rent increases over time. This provides potential upside on your investment down the road as well as protection against inflation.
Also, check whether there are any concessions offered, such as free rent periods or tenant improvement allowances, as these can significantly affect your income as you own the property.
Knowing these details helps you figure out how much you can expect to get in rental income each month and what kind of ROI you can anticipate from your property.
How a Good NNN Real Estate Broker Can Help
Finding the perfect auto body shop for lease online can be a daunting task. That is why it would be wise to enlist the help of an experienced NNN real estate broker.
These professionals have access to multiple listings, including those that are not available publicly yet. They can provide you with valuable insights into comparable sales and market rents in your area.
They are also familiar with the legalities involved in purchasing commercial properties and can handle negotiations on your behalf to ensure that you get the best deal possible.
However, they can help you with the due diligence process and make sure that all legal documents are properly filled out. This way, you will not be caught off-guard when it comes time to close the deal.
Overall, having a NNN real estate broker by your side can increase your chances of finding the perfect investment property and maximize your ROI in the long run.
Searching for auto body shops for lease online does not have to be difficult if you know what to look for.
By doing your research, carefully assessing potential properties, and working with a qualified broker, you can be sure that you will find the right property for your needs.
With careful planning and due diligence, you are on your way to enjoying the benefits of owning a lucrative NNN investment.
For more useful investment tips and information, you can check out our other posts. Happy investing!