Net leases are becoming more popular with commercial property investors as well as their tenants. In a net lease, the tenant pays a portion or all of the operating expenses for the property, expenses that are normally paid for by the owner in a gross lease or full service agreement.
Leases are contracts between a property owner and a tenant who will occupy the property. Most people are familiar with gross or full service leases. In a gross lease, the tenant will pay one fixed price each month to the property owner for rent. The property owner is then responsible for all of the property’s expenses, such as taxes, insurance, electric, maintenance, etc.
Commercial real estate investors are attracted to net leases because it allows them to purchase income producing properties without having to deal with the financial responsibilities associated with gross leases. In this way, investors can enjoy the benefits of earning income without the day-to-day headaches that often go along with commercial property administration and maintenance costs.