Basic Triple Net Lease Investment Facts

Many are now beginning to realize that triple net leased real estate investments offer a more consistent and stable return on their investments and present large opportunities in the real estate market. Indeed, the triple net leasing market is booming, with demand far exceeding supply in most areas of the US. Largely due to the baby boomer population seeking new types of retirement investments, the demand for these types of real estate continues to be high.

A triple net (sometimes referred to as net-net-net or NNN) lease is an agreement where the tenant agrees to pay all of the building’s operating and maintenance expenses, as well as the property’s real estate taxes and insurance premiums. In addition, the lessee will also be responsible for all expenses associated with the repair and maintenance of common areas. This is in contrast to a full-serviced lease where the owner pays for all expenses, including repair, maintenance, taxes, and insurance costs.

Triple net leases are typical for commercial buildings. The most typical triple net lease properties are also owned by businesses and restaurants, as well as government agencies. People who have funds also spend their money buying homes, not to live in them, but to lease them to other people for profit.

]]>

Interest rates on triple net leased investments may be on the rise, but cap rates so far have not necessarily followed, and pricing remains steady. The demand remains strong partly because people are looking for non-management investments and triple net leased properties fit the bill perfectly. In addition to management-free properties, a lot of retirees are looking for relatively safer investments as opposed to the traditional stock market approach.

Triple net leased investments, however, come with their own set of challenges. At first glance, it may seem like the scales are in favor of the owner. After all, the tenant takes care of expenses, taxes, and common area maintenance. Additionally, it can become confusing which maintenance issues fall under the Common Area Maintenance (CAM) fees.

The best scenario for both parties would be to have clearly defined responsibilities that protect the interests of both. Owners want their net leased investments to be well-maintained as much as they want to receive regular (usually monthly) payments from their tenants. Tenants, meanwhile, should be able to focus on why they rented such properties and will not want structural defects that can hinder their business operations.