When considering a triple net lease, or NNN lease, it is important to understand the parameters of the contract at hand. A triple net lease, unlike a single or double net lease, removes the responsibilities associated with the NNN lease property and transfers them directly to the tenant. The nature of a triple net lease allocates three especially significant financial responsibilities to the tenant, including net real estate property taxes, net building insurance and net property maintenance. The duration of a triple net lease extends anywhere from 10 to 15 years and involves set terms agreed upon by the investor and tenant on the rent cost and potential of rent increase over time. Triple net leases are ideal for those seeking real estate investments that provide steady financial growth with relatively low risk and the potential for possible capital appreciation of the property. Below are a few of the benefits that make them so appealing.
Triple net leases require low-maintenance upkeep that cannot be found in single and double net leases. The main responsibilities of taxes, maintenance and insurance are shifted to the tenant for a locked-in term of 10 to 15 years with the investor having little to no responsibilities to manage on a regular basis.
The nature of a triple net lease is to have agreed upon terms for the duration of the lease with any set rent increases drafted in the contract. The purpose of this type of an agreement is to ensure that both parties have an awareness of the fiscal elements of the term with no unexpected alterations. The investor then benefits from a consistent and reliable stream of income while the tenant is guaranteed a known price for the duration of the term.
As with any property, NNN lease properties require management, maintenance and repairs. Triple net leases mean that fixing leaky faucets and scheduling lawn work are no longer a burden on the investor. Instead of having to micromanage these time-consuming and expensive responsibilities, a triple net lease property investor gets to allocate them to the property’s tenant.
No Surprise Expenses
A triple net lease releases all of the maintenance, repair, taxation and insurance concerns to the tenant, leaving the investor free of any unforeseen costs. Additionally, if the NNN lease property is sold, the investor has the ability to transfer his or her capital into a different triple net lease investment with no taxation thanks to a 1031 tax-deferred exchange.
Easily Maintained Residual Value
A triple net lease generally extends over a 10- to 15-year term in which value is easily maintained with little risk. The steady nature of this long-term lease provides consistent income with minimal surprise and little to no upkeep on behalf of the investor.
Understanding how rental expenses are charged within different leases is a crucial component of responsibly renting commercial real estate spaces. Ground + Space is a leading commercial real estate brokerage firm that specializes in single-tenant and retail NNN investments. Contact us today to find out more about our current listings!