The Time/Money/Risk Benefits of Triple Net Leases
Investors will often hear that there are many benefits to triple net leases but for those who may be exchanging from multi-family, land, or manufactured home parks—or new investors that may have inherited property—the benefits of the triple-net, may not be clear.
A net lease is a type of commercial lease between a tenant and property owner. The three most common types of net leases are:
- Single Net Lease: Tenant pays Rent + Taxes
- Double Net Lease: Tenant pays Rent + Taxes + Insurance
- Triple Net Lease: Tenant pays Rent + Taxes + Insurance + Maintenance/Operating Expenses
For the purposes of this article we will conduct a Time/Money/Risk analysis on the triple net lease, which is where, in addition to paying the rent, the tenant-–and not the landlord–-is responsible for paying some or all of the building’s operating expenses such as insurance, taxes, maintenance, repairs, and utilities.
- The triple net lease, whether on a single-tenant or multi-tenant property, affords the property owner the most freedom in terms of time and flexibility thanks to its hands-off management structure.
- With NNN properties, landlords can avoid the typical property management obligations and hassles to enjoy more time to dedicate to things they prefer to do. As noted earlier, in a triple net lease, also known as NNN, the tenant pays for and manages all of the building’s operating expenses, real estate taxes, insurance, and maintenance, freeing the property owner from the responsibility and hassle.
Assets That Hold & Grow Value
- Triple net lease properties often attract corporate-backed credit tenants. Long-term leases with credit tenants allow your investment to grow and weather economic cycles.
Steady & Predictable Passive Income
- Triple net properties allow property owners to receive a steady and predictable stream of income from a reliable source every month with minimal management and attention.
Reliable Source of Income
- Single-tenant net-leased properties attract an array of corporate-backed credit tenants that provide greater long-term reliability.
- Triple net leases often have built-in increases that offer opportunities for better planning for both the tenant and landlord, and provide a hedge against long-term inflation risk. In addition, they also often have options to extend in five or 10-year increments.
Defer Taxes at the Time of the Sale
- When a property owner is ready to sell, 1031 Exchanges allow them to defer the capital gains on the property
- Triple net-leased properties tend to offer less risk than other commercial real estate investments that have tenants with non-investment grade credit profiles, although no investment is risk-free.
Longer Leases / More Stability
- Triple net-leased properties have longer-term leases that provide greater stability and reduce risk and worry.
Ready to invest in a triple net property? Contact us at: 954-245-3416.
Learn more about NNN and single-tenant net-leased properties. Watch our video
All real estate investments carry risks. Nothing in this post shall be construed as tax or investment advice. A buyer and their tax, financial, legal, and construction advisors should conduct a careful, independent investigation of any property to determine to your satisfaction the suitability of the property for your needs.
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