A triple net lease refers to a leasing agreement which designates the lessee in which the tenant is primarily responsible for all the associated costs of the asset being leased, in addition to the rental fee which is applied to the lease. The expenses include insurance, property taxes, repair, maintenance, utilities, operations, and other items. Triple a net lease is also called as net-net-net (NNN) lease that relates to net real estate taxes, net common area maintenance, and net building insurance. In the commercial real estate, the standard names on the different sets of costs being passed to the tenant include single net lease, double net lease, triple net lease, bondable lease, and ground lease.
Triple net leased properties have become increasingly popular for those investors who are looking for a steady income with a relatively lower risks as compared to other forms of investments. A triple net lease investment typically offer a portfolio of properties comprising of three or more high-grade commercial properties, wherein a single tenant fully lease the property, with current in-place cash flow. Commercial properties under the triple net lease may include shopping centers, office buildings, industrial parks or free-standing buildings operated by restaurant chains or banks, with a typical lease term agreement of ten to fifteen years in a built-in contractual rent escalation. There are a lot of benefits triple net investments can bring to an investor such as long-term and stable income with capital appreciation of the property. Investing in a triple net property enables leasing the property to a quality tenant, freedom from management responsibilities, with attractive financing, stable cash flow, and unique tax benefits which only real estate provides. A triple net investment is appealing to a part-time investor who is looking for a guaranteed income without the risks of management responsibilities, and it is an attractive exit strategy for those with matured portfolios.
As with any other forms of investment, you know as an investor that there are associated risks, so you need to consider important things when structuring and valuing the deal. It is very important to assess the health and quality of a tenant’s business, ensuring the financial strength or financial capability. When it comes to evaluating your tenant, the different criteria you need to consider may include the operational margin, debt to equity ratios, a number of stores, the stability of management, and the outlook for the industry sector. You are actually providing a real estate capital to the business of your tenant, and the success has a direct impact on the long-term success of your triple net investment. Just contact us by checking our details in our website’s homepage if you are looking for triple net investment.