A NNN lease or Triple Net Lease is the most popular type of commercial real estate leases. The tenant – not landlord – of NNN lease properties is liable for the three “nets’ – insurance, taxes and, repair costs. Tenants also pay a fixed rent for the lease term. A NNN lease term can generally range between 5-50 years.
The Major Benefits or Advantages of a NNN lease are as follows:
- Passive investment : as the owner or investor in an NNN lease property, you can shift all management responsibilities (and therefore, operating risk) on to the tenant who will make improvements, pay property taxes and all insurances, in addition to a rent;
- Fixed Income: NNN lease property permits a stable, rental income for an landlord or investor, subject to tenant and/or tenant guarantor credit (the higher the better) and the quality of the negotiated lease;
- Attractive rents for tenants: property management by a landlord will always include a profit element, as in Gross or Modified Gross leases. Since triple net leases will be “managed” by the tenant, they will necessarily have lower rents compared to other Gross type of real estate leases.
NNN lease deals are no exceptions in terms of risk factors for investors. For example, if a landlord leases real estate to a tenant who ultimately defaults on the lease, the landlord will have to step into the lease and bear the costs of the three “nets”, i.e. taxes, insurance, and repair costs. This subrogation enables the NNN property to be well-maintained, otherwise it could lead to lowered rent expectations and lowered property market values over the long term.
For a deeper investigation about what you need to know About NNN Leases, feel free to consult with a NNN broker at the Triple Net Investment Group. Know more about the pros and cons of a NNN lease investment. Call or email us today!
