As a retailer of paints and primers, which are high-demand products, Sherwin-Williams’ net lease properties are an attractive asset for investors. In a way, they are good if you are seeking a lower price point, while still wanting a credit-worthy tenant.
So, if you are planning to engage in real estate or want to add something lucrative to your investment portfolio, you should consider buying Sherwin-Williams net leases.
About Sherwin-Williams
Founded by Henry Sherwin and Edward Williams in 1866, Sherwin-Williams develops, manufactures, distributes, and sells coatings, paints, and other related products to various customers in the commercial, industrial, and retail sectors. They sell major brands, including Krylon, Water Seal, Thompson’s, Minwax, Dutch Boy, and their own Sherwin-Williams.
They operate primarily in North and South America, but they also have stores in Europe, Asia, and the Caribbean region. Today, they already have more than 4,600 locations in these areas, with a high number of Sherwin-Williams net leases being sold to interested investors.
Why Invest in Sherwin-Williams Net Lease Properties
When it comes to investing in the company’s business, you do not only have the opportunity to purchase triple net leases or NNN Sherwin-Williams stores, as their stores are also sold as double net leases (NN). This means that you have more options to choose from that fit your investment preferences.
Though the company’s net leases are usually offered for only up to 10 years, which is shorter than the usual 15 years, it offers favorable increases, with some up to 10% per option. So, as the owner, you will definitely be able to see sustainable growth in your revenues for the long term.
As for the location, their stores are typically located inside big and small shopping malls. Of course, as NN and NNN properties, you will be able to enjoy some cost benefits, as the tenant will be the one to handle most of the expenses of running the property. You can expect a steady stream of passive income all the while having minimal responsibilities on your part.
Sherwin-Williams Net Lease Investment Requirements
As with other types of net lease and franchise purchases, the company would assess your net worth before you can buy one of their stores. You would also be required to produce the money for the purchase. The typical price of a Sherwin-Williams store can run from around $500,000 to around $4,000,000.
Aside from having your net worth assessed, you might also be required to join some training to get yourself familiar with the business. This ensures all its operations will be in line with the standards set by the company for its stores.
Important Things to Consider When Investing in Sherwin-Williams Stores
While investing in the Sherwin-Williams real estate department brings about good income potentials, there are factors that you still need to consider to land on the best property available today. Here are things to keep in mind when assessing these properties.
Cap Rate
In the world of NNN investments, a high capitalization rate (cap rate)—which gives you a general idea of how profitable a potential property is—is always favorable to buyers. It means you will be paying less for the store you are buying while assuring yourself of a quick return on investment.
As for Sherwin-Williams real estate for sale, it usually has a cap rate of 5.75% to 6.75%. But if you want to exactly know how high is the cap rate of the property you are considering, you can use this simple formula:
Cap Rate = Net Operating Income (NOI) / Purchase Price
Location
As with starting any business, the location of the Sherwin-Williams store you are purchasing will have an influence on its earnings potential. While most of their stores are located inside shopping centers, there are also those which are not.
In this case, you should choose a location with easy access to the streets. This way, it will be highly visible to potential customers.
It would also help your bottom line if the location you choose has a high population density. The more people living and working in the location means more business for the store.
Market Performance
For a business to thrive, it should also be located in a place with a booming market. As you will be buying a business that sells paint and coatings, it would be best for you to buy a property in a place with burgeoning construction industry.
Compliance
Keep in mind that any issue in the net lease property you are purchasing can completely destroy your investment. For that reason, you should ensure that the structure complies with the environmental and zoning laws set by the state for businesses.
Insurance
A standard agreement between landlord and tenant in a triple net lease is that the tenant will be responsible for most of the expenses incurred in running the business. However, there are still costs that you, as the landlord, are responsible for, such as insurance.
So, before you sign on the dotted line, you should have a breakdown of the insurance policies that the business needs and who is responsible for paying each. This is important so that you will be able to have a full picture of your financial responsibilities.
Legal Protection
Last but not the least, you should know your legal protections under the lease agreement. Remember that the ways through which NNN properties are sold and purchased can vary, and these also dictate the legal protections afforded to you. To know your legal rights and obligations as a new owner of a Sherwin-Williams store, you should review the contract with the help of a lawyer before signing it.
Conclusion
Generally speaking, Sherwin-Williams net leases are a good investment option for new and experienced investors. They can be a good vehicle to grow your portfolio, build wealth, and achieve the financial freedom that you are looking for.
However, it is important to remember that not all net lease properties offer the same income potential. To ensure that you are purchasing one that gives the highest value for money, you should do your due diligence in your search. So, take the time to do extensive research, seek the help of net lease advisors, and keep in mind the essential considerations.
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