You can define the triple net lease (NNN) as a lease agreement on a real estate whereby the lessee or tenant agrees to pay all the property expenses, including insurance, maintenance, and real estate taxes. These are in addition to the utilities and rent of the house. Suppose you buy a property such as CVS for sale; the lease structure for tenants includes a standard amount of rent, which should be paid monthly over an extended period. Plus, if there’s a disaster/theft, the tenant must also make payments for those losses. In this manner, it helps protect the property owners from the risk of investments.
While NNN is where the tenant pays for everything, in a typical rent agreement, some or all of the additional expenses are the landlord’s responsibility.
NNN is usually found in commercial real estate. And they have lower rents as the tenant is liable to pay the additional expenses. The NNN properties have become popular investment vehicles for investors as it offers low-risk and steady income.
Are there other types?
Yes, there are two other types of Net leases- single net and double net leases. The difference is the extra expenses the lessee has to pay. In a single net lease, the landlord transfers the minimal amount of risk and costs. In a double net lease, the tenant has to pay just the property and insurance amount.
What are the advantages of triple net leases?
Though there are more expenses on the tenant’s side, there are advantages for both parties. They are:
Long-term occupancy
Almost all of the NNN agreements are made for long-term tenant occupancy(20 years+). Landlords love this option as this minimises the risk and losses of vacant property between tenants.
Low-risk investment
As the tenant is bound to pay all the expenses, a triple net lease is fairly a low-risk investment for an investor—also the reason for the increasing popularity of NNN properties.
Regular income source
NNN offers a consistent flow of income for an investor. In other cases, a good amount of rent is spent on the additional expense by the landlord, but in this case, the landlord doesn’t have to pay anything for the additional costs.
Fewer duties for the landlord
The triple lease is a blessing for the landlords. Here, the landlord’s responsibilities are much less than what’s in the conventional agreement. More time and money (in hand) means the investor/landlord can concentrate on other business ventures.
Long-term business footprint
Tenants (if using the property for business) who agree to lease for an extended period get the benefits of having a stable and permanent location for their business.
Location
Usually, the NNN properties like CVS for sale are located close to other businesses and in prime locations in the city. This is an excellent deal for people who wants to visit the property (families for normal tenants/customers for business owners).
Tax benefits
As tenants pay all the taxes, they can buy these expenses into their business expenses and get some tax benefits. If you are paying all the expenses, you are already paying different taxes to the government. Hence, you can avoid some tax on your business or job.
All these advantages make the NNN properties an attractive option for investors and tenants. And this is also a reason for the increased demand for triple net lease properties.
