Triple Net Lease
A Triple Net Lease, also called an NNN Lease is a viable option for most investors who are thinking of extending the scope of their portfolio. An NNN lease is a kind of lease arrangement in which the tenant, also called the lessee, becomes accountable for the expenses that are pertinent to the asset that is being leased along with the agreed upon amount for the lease’s rent. Because of the setup, the rent offered for the lease is typically lower than what one would expect from the particular property. Among the responsibilities that the lessee has to accept are the building insurance, common maintenance and area upkeep, and the real estate taxes on the leased assets. All the payments required are paid in net. There are many opportunities which can be beneficial in such situations, and investors should definitely explore such alternatives.
Triple Net Lease, What Is It?
In a Triple Net Commercial Lease, the lessee or tenant makes payment to the lessor or landlord, rent plus also covers maintenance, insurance, and the real estate taxes. This type of lease is often used in commercial real estate. It is very famous amongst retail properties and multi-tenant industrial.
Several other versions of the net lease are the double and single net lease. In a double net lease, the tenant is required to make payment of insurance, taxes, and rent. In a single net lease, the tenant is required to make payment of rent and real estate taxes. As you can perceive, there is a large variety of ways to access a commercial real estate deal.
Net lease deals allow for less capital outlay for the investor and lower fixed rents for the tenant. Some of the tenants have strong resistance to signing up for a net lease since they can make their variable costs greater and volatile For instance, maintenance such as fixing roofs, replacing, gutters, and other parts of the building could add on to their prices. It may make budgeting somewhat difficult.
Benefits of a Triple Net Lease
The benefits of investing in Triple Net Lease properties are fairly easy to see. You get a regular income with very low maintenance requirements on your part. You have the opportunity for some nice tax write-offs, yet receive all the benefits as the property appreciates in value.
The risks, too, are relatively straightforward. After all, it’s easy to understand that, although it’s less likely, a business can default just like an individual leaseholder. Even if they don’t default, they could hit hard financial times and start neglecting their responsibilities, so you’ll still need to keep an eye on the property to make sure the tenant is keeping up with all the expenses and maintenance jobs.
What isn’t so easy to come to terms with, though, is all the legal jargon involved in the NNN Lease itself. First, let’s get clear on the definition of a Triple Net Lease. The NNN lease is a lease designed such that the lessee is responsible for paying real estate taxes, building insurance, and building maintenance (the three “net” expenses) on the property. This is in addition to regular expenses like utilities and grounds upkeep, which will also be paid by the tenant. The triple net lease is different from a double net lease in that in the double net lease the property owner is still responsible for expenses involving the roof, foundation, and weight-bearing walls as well as certain utilities like heating.
How NNN Leases Work
If you’re interested in finding out more about the details of how Triple Net Leases are worded, one of the easiest ways to learn more is to grab a few sample lease forms from the net and read through them. Just keep in mind that these samples should only be used to give you a general idea of what this type of lease is all about. A lot of the free forms online contain inaccuracies or out-of-date information, which makes them unsuitable for use as-is. What’s more, because these leases involved a considerable investment over a long period, they’re usually highly individualized to suit the needs of the property owner and the tenant.
Another good way to learn more about these investments is to browse through listings of NNN Lease properties for sales. Usually, you’ll be able to find these through real estate agents that specialize in commercial properties. There are also databases online you can look through to get an idea of what’s available in your area. So that you don’t get too off track, though, start off by looking at properties related to a field of business you already have some experience with.
While a Triple Net Lease offers plenty of advantages to real estate investors with the capital to get started in this type of investment, there are also risks to consider. Investing in net lease commercial properties isn’t considered a high-risk endeavor, but it’s best to know all you can about these investments before you get started.
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