Benefits and Drawbacks of Net Leased Investments

Leasing a property for business is different from leasing it for residential purpose. It involves certain payment conditions based on the nature and stability of the business. Triple net lease is among the most common types wherein the lessee or tenant pays the landlord extra fees aside from the rent. All types of net lease require additional fees but in this type, the tenant needs to pay for insurance, taxes, and maintenance of the property.

Such a condition provides the lessee or tenant with complete control over the property without buying it. Any modification is allowed, as long as the resulting charges will be covered by the tenant aside from the original fees. The lease can last up to 50 years depending on the agreement between the landlord and the tenant and on the stability of the business.

Triple net lease primarily benefits the landlord. While everything is paid, including repair and maintenance, the landlord does not have to worry about anything, as all of it will be taken care of by the company renting the place. Most companies preferring this type of lease are prominent and stable, giving the property an indirect but instant market. Once the company decides to lead property, it can easily be sold because of its previous tenant.

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The tenant also benefits from triple net leased investments. Although they are compelled to pay more than expected, they have full control of the property. The landlord allows the tenant to make structural and aesthetic changes, as long as power costs will be covered. Periodic fees for the lease already include the increase increment, making repayment easier for the tenant.

However, both the tenants and the landlord must consider certain drawbacks of net leased investments to protect their individual interest. If the tenant fails to pay the necessary additional fees because of default in business, the landlord will be left with a mess and will scramble to pay taxes and insurance.

The tenant, on the other hand, does not have control over inflation in property taxes and insurance, although this problem rarely occurs and is part of the contingency plans of most companies. Net leased investments remain the best option for companies looking forward to a good leasing deal.