Comparing the Types of Net Lease Investment

Real estate and homes for rent are still growing industries in the country despite major business collapses in the past years. They are severely affected while blamed as having caused the recession, but they keep going on, even skyrocketing in revenues.

In renting a house, tenants must understand several things about real estate and rent to avoid paying more and delaying payment. One is that most tenants are also covered by net lease investment or payment for real estate taxes, insurance, maintenance, repair, utilities and other items. Normally, a tenant only pays for the rent; other expenses involved are paid separately by the landlord. However, there are landlords implementing net lease in various ways.

There are four legally recognized types of net leases. One is single net lease investment. In this type, the lessee/tenant is required to pay for the rent and the property tax. Repair and maintenance are covered by the landlord through a separate fund to which the lessee does not contribute. However, this exempts cases where the needed repair and maintenance is caused by the tenant’s negligence. Damage is computed and charged.

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A double net lease investment is more stringent than single net lease in that not only the property tax is charged to the tenant but also the house insurance. The tenant and the landlord enter a written agreement that extra expenses will be covered to the tenant, although some agreements end at a certain period. The principle is slightly different in commercial structures where extra expenses are computed and covered by the tenant according to the floor area.

In a triple net lease investment, the lessee is bound to cover repair and maintenance. This is common to leases of commercial freestanding buildings but legally applicable to leases of residential houses. All of these are in addition to the base lease received by the lessor. Depending on the agreement, the lessee can pay the expenses himself/herself, or the lessor receives and manages the payment.

The fourth type of net lease investment is the bondable lease. Here, the tenant carries every risk associated with the house. The expenses are not identified specifically but all are covered by the tenant. Unlike other agreements, this lease is not terminable by the tenant, thus he/she is under a form of a bond.

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