You’re probably familiar with O’Reilly Auto Parts stores. The company has a nationwide presence, and they’re known for selling car parts and accessories.
But what you may not know is that the company also has a strong presence in the commercial real estate market. It welcomes investors who are interested in their business to buy franchises and properties that are currently under lease. So, if you’re interested in passive investment, O’Reilly Auto Parts triple net leases should be at the top of your list!
In this guide, we’ll teach you everything you need to know about choosing the perfect O’Reilly Auto Parts property to invest in.
O’Reilly Auto Parts: About the Company
O’Reilly is a publicly-traded company that was founded in 1957 and headquartered in Springfield, Missouri. It is a retailer of automotive aftermarket parts and accessories, selling everything that you would need to fix or maintain your vehicle. Their products include engine components, brakes, batteries, suspension systems, and so on. They also have a wide selection of tools and equipment for both professional mechanics and DIY-ers.
The company has been growing steadily over the years. In fact, O’Reilly’s sales have increased every year for the past 20 years! This makes it a very stable and reliable investment for real estate investors who are looking for long-term growth potential.
Today, O’Reilly Auto Parts already has more than 5,600 stores in 47 states, with some of them available for lease. The company plans to continue growing in the future, which means that there will be more opportunities for investors to buy its properties.
O’Reilly Auto Parts Franchise Requirements
Before you invest in this company’s real estate, you should first know the basic O Reilly Auto Parts franchise requirements.
- A net worth amount required by the company – This is to ensure that you have the financial resources to buy and maintain an O’Reilly automotive parts franchise.
- A minimum worth of liquid assets stipulated by the company – This will be needed to pay the franchise fee as well as the initial investment costs.
- Experience in either the automotive industry or the retailing business – This will help you understand the company’s operations and run your store effectively.
- Training – This is to familiarize you with the company’s products, services, and systems.
- Franchise agreement – This is a legally binding contract that sets forth the rights and obligations of both parties.
While you do not need to comply with these requirements when you are buying O’Reilly NNN properties (you would be buying one with an existing tenant), it is still important to know them as it will give you knowledge of how their business is run.
Choosing an O’Reilly Auto Parts Business for Sale: Key Factors to Consider
Now that you know about the company and the requirements for buying their auto parts store franchise, it’s time to choose the perfect property to invest in. Here are some key factors that you should consider.
Location
This could be the most important factor to consider when buying an auto parts business for sale. Ideally, you should invest in an O’Reilly store that is situated in a high-traffic area, such as near highways, intersections, or busy streets. It should also be located in a place with a dense population, as there would be a higher demand for automotive parts and services.
Another thing to consider is whether the store is located in a city or rural area. Stores in the former tend to have higher sales than those in the latter because there are more cars in cities, and people in urban areas tend to drive more.
Condition of the Property
Typically, O’Reilly Auto Parts stores are built on leased land. And, because they are NNN properties, the tenant will be the one maintaining the property.
Regardless, it is important to check the property in person first to ensure its quality, or you may end up with one that would pose certain structural issues down the road.
Property Size
When assessing O’Reilly Auto Parts business opportunities, you should consider the size of the property, as it will determine how much inventory it can carry and how many customers can be served at one time. Remember that the profitability of the existing tenant will also have an impact on your bottom line as the landlord.
And, if you plan on expanding the property in the future, you should choose a property that is large enough to accommodate your plans.
Capitalization Rate
The capitalization rate (cap rate) is the ratio of the property’s annual net operating income (NOI) against how much it costs when sold. A higher cap rate means a higher return on investment (ROI). The NOI is the difference between the property’s annual gross income and its annual expenses. And, a higher NOI means a higher (ROI).
In order to calculate the cap rate of a potential property, you will need to know the property’s purchase price and its net operating income. Then, you can use the following formula:
Cap Rate = Net Operating Income / Purchase Price
For example, if a property has a purchase price of $100,000 and a net operating income of $15,000, its cap rate would be 15%.
However, it is also important to remember that the actual ROI will also depend on the property’s appreciation rate. So, take the time to do some research before you make a decision.
Existing Lease Terms
If you are buying an O’Reilly Auto Parts store that is already leased, you will need to consider the existing lease terms. These terms will determine how long the tenant can stay in the property and how much rent you can expect until the contract ends, which is important in case the tenant decides not to renew the agreement. Make no mistake, it can sometimes be difficult to quickly find a new tenant for your property.
So, it is important to review the existing lease carefully before making an offer on the property. You should also consult with a real estate attorney to make sure that the lease is fair and favorable for you.
O’Reilly Auto Parts Lease Terms and Conditions
As previously implied, O’Reilly leases are typically triple net leases (NNN). This means that the tenant is responsible for paying all of the expenses associated with the property, such as taxes, insurance, and repairs.
Apart from that, their lease agreements would last for about 15 years, with O’Reilly having three (optional) five-year renewal periods. The base rent would increase by at least three percent every five years and is subject to change should O’Reilly decide to remodel or expand the leased premises.
All in all, NNN leases are usually more favorable for landlords because they minimize the amount of work that needs to be done on the property. And, they are undeniably one of the best investment opportunities to take if your goal is to enjoy passive income for long periods of time.
Where to Look for O’Reilly Auto Parts NNN Properties for Sale
The best way to look for these properties is using online listing sites that specialize in O’Reilly Auto Parts triple net leases. These sites are also usually run by real estate brokers who will be willing to help you find the perfect property for your needs.
Apart from that, they would also give you advice on how to navigate the NNN real estate market and how to run your business. Simply put, they would make sure that you are well-informed about everything that there is to know about O’Reilly Auto Parts triple net leases before you make a decision.
Apart from using these listing sites, you can of course contact O’Reilly Auto Parts directly and ask if they have any stores that are up for sale in the areas you are interested in. However, the company might not disclose some information to you. So, the best way to find these properties is still through online listings.
Conclusion
O’Reilly Auto Parts triple net leases are a great way to invest in real estate. They offer a high potential ROI and are relatively low maintenance. However, it is important to do your due diligence before buying one of their stores.
Be sure to review the existing lease terms carefully and consult the professionals. You should also use reputable online listing sites to find the perfect property for your requirements. By doing so, you’re sure to find the perfect O’Reilly Auto Parts property to invest in.
Do you have any questions about investing in real estate? Leave them in the comments below. And, be sure to check the other articles on our site for more useful tips and information.
Happy investing!
