What is a Triple Net Lease?
The triple net lease, also called NNN Leases, place responsibility with the tenant for three payments in addition to the rent. The tenant pays for building maintenance, insurance and property taxes. This arrangement may have advantages for both parties, as the rent is typically lower with this type of lease, which benefits the tenant, than with the gross or percentage leases. Lower rent makes it easier to find tenants, so the landlord is less likely to have a vacant building.
Triple Net Lease as an Investor
From an investor standpoint, NNN Leases/Triple Net Leases offer a stable long-term real estate investment where the owner/investor has very little to do with the active management of the property. Normally, these leases are with credit worthy tenants with corporate guarantees. This means that the investor does not have a high risk of the tenant failing or not receiving a rent payment if the business goes under. Another big draw of net lease investments if the reliable, stable cash-flow for the long term. Net leases usually have long lease terms from 15-20 years with multiple options in place with rent increases to account for inflation.
The net lease experts at Avison Young know this market and can work with you to diversify your portfolio and help select the perfect property for your investment goals and criteria. Below our experts have elaborated on the benefits of triple net lease and why it would benefit you as an investor.
Landlords who own a single tenant property with an NNN lease can enjoy the luxury of minimal management. With the tenant taking care of property taxes, insurance and maintenance, there is not much left for a landlord to take care of. In fact, the landlord is just responsible for bookkeeping, tax returns, and deciding when to refinance the property. This can be very beneficial for landlords with full-time jobs because they do not have to worry about taking care of typical maintenance duties.
Stable cash flow
Another attractive quality of investing in a single tenant property with a triple net lease is stable cash flow. New leases typically span at least 10 years, so landlords are guaranteed a positive cash flow for quite a while. Landlords don’t have to worry about finding new tenants every years and having their buildings vacant for months at a time.
Low-entry price point
Single tenant properties are also typically more affordable than other types of properties. In fact, the prices for these properties can start as low as $500,000. An investor can buy a property at an affordable rate, obtain a tenant and start earning the money he or she invested back fairly quickly.
More financing options
With most real estate properties, loans are written against the value of the property. Single tenant properties, on the other hand, are a little different. Because a single tenant property is backed up the tenant’s credit as much as the value of the property, investors have more financing options available to them.