Investing in triple net lease real estate is a great way to diversify your portfolio, create an income stream, and build equity all at the same time. NNN properties typically have great locations with good traffic and strong, proximal businesses in the area. This lease type also comes with a long-term, qualified business tenant in place to ensure the longevity of your investment.
As a result, triple net lease real estate is popular among investors and tenants alike. Here are 5 key things you should know about lease service type triple net.
1. In a Triple Net lease, the Tenant Absorbs Most of a Property’s Operating Costs Into Their Business Expenses.
A triple net lease, also known as an NNN lease, is an agreement between a property owner and a tenant where the tenant absorbs (in addition to an agreed upon monthly rent payment) most all the costs and expenses for the property, including:
- Property Taxes
- Insurance Premiums
- All Maintenance, Upkeep and Repairs
In an NNN lease, the tenant has more financial responsibilities than in other lease types, but these costs can be built into their business expenses and offer tax deductions for the tenant as well.
2. Triple Net Lease Properties are Long-Term, Stable Investments.
Investing in a triple net lease property can provide you with a steady income stream that is especially reliable since you’ll receive a monthly rent payment from your tenant and you can pass along expenses associated to the building that would normally be an owner’s responsibility.
Because the tenant will be responsible for the majority of the triple net expenses, you won’t have to encounter any surprise repair costs, tax bills, or other maintenance fees that could detract from the profitability of your investment.
3. NNN Leases Offer Investors a Low-Touch, Low-Risk Approach to Building Equity.
Triple net lease real estate is popular among investors who are looking for properties that are relatively low-risk and high reward, without a hefty amount of involvement and maintenance (whether on the property or with tenants). Triple net lease properties can be ideal for such investors, because you’re dealing with one property, one long-term tenant (of anywhere from 10 to 25 years depending on the lease), and one set of agreement stipulations between you and the tenant.
4. Triple Net Lease Terms Can Be as Unique as the Property Itself.
In a triple net lease, the tenant will be responsible for a vast majority of the operational expenses of a building, such as taxes, insurance, and maintenance. However, every NNN lease deal is as unique as the property itself, and terms can vary greatly from one property to another.
Each lease is specific to the terms that have been negotiated, so it’s important to know those terms beforehand. Otherwise, you may find yourself with limited profits due to unexpected costs that come up, which you didn’t know fell under your obligations.
For example, some triple net lease deals may require that you take out certain insurance policies and cover those premiums, or it may be outlined that the property owner is responsible for maintenance on certain parts of the building such as the structure and roof. Knowing ahead of time what financial responsibilities you have as the property owner will help you determine the profitability of your investment and keep surprises from cutting into your investment down the line.
5. A Net Lease Advisor Can Help Guide Your NNN Investment Strategy.
Purchasing a triple net lease property is a large investment, and one you need to make with careful consideration to the type of business location you’re buying and what type of longevity long-term tenants can create in that location. There are a lot of factors that go into choosing and financing a single tenant net lease property, and working with a skilled team of advisors such as Sands Investment Group (SIG) can ensure that you have specialized support and guidance every step of the way.
Sands Investment Group is knowledgeable in triple net leases, and has the expertise to guide you through the process of finding and financing your next investment (in fact, we’re the fastest growing net lease investment company in America, with over 1,900 transactions in 48 states to the tune of $4.5 Billion since 2010).
Want to learn more about NNN properties for sale and speak with an industry expert about investing in a triple net lease property? Get in touch with an expert today by calling 844.4.SIG.NNN or sending us an email at info@SIGnnn.com.