Net lease real estate is rich in opportunity for both property owners (who can obtain a steady income steam on their investment) and the tenants (who occupy a space where they run their business). There are different variations of net lease deals, in which the tenant and the property owner will each have different financial responsibilities for the property. These various net lease deal types typically fall into one of three categories, which, in order of popularity, are: Triple Net (NNN) Lease, Double Net Lease, and Single Net Lease.
While many of our investors are familiar with the more popular NNN lease deals and parameters, we’re often asked, “What is a double net lease?”
In this post, we’ll address this question by focusing on double net leases. We’ll share the advantages and potential drawbacks of this net lease type and describe how double net leases differ from single and triple net deals.
What is a Double Net Lease?
A double net lease is an agreement between a property owner and a tenant, in which the tenant is responsible for paying property taxes and insurance premiums and deductibles on the building, in addition to their monthly rent. The property owner acts as a landlord and is responsible for handling all the building upkeep and maintenance costs to keep the property functional and operating.
Advantages of a Double Net Lease
In a double net lease, the property owner is able to pass through a good portion of the financial responsibilities for the property by making the tenant responsible for taxes and insurance. This means that the property owner doesn’t have to account for yearly property taxes or worry about maintaining insurance policies, since these fall under the business responsibilities of the tenant.
Drawbacks of a Double Net Lease
The main drawback of double net leases is that they typically require the property owner to act as a landlord by assuming all the financial and logistical responsibilities of maintaining their building and attending to any maintenance, structural, or other issues that may arise. This means that the property owner must play a more active role as landlord and may encounter unexpected costs associated to the upkeep of the property, which can easily (and quickly) eat into profit margins on the property investment.
When you’re considering an investment opportunity with a double net lease deal in place, it’s important that you understand the fine details of the agreement, so you know exactly which financial responsibilities will be yours as the property owner. Knowing the history and condition of the building will also help you determine if you can expect frequent repairs and upkeep, or if that work will be minimal.
Other Types of Net Leases
To fully understand what type of net lease will work best with your portfolio and help you achieve your investment goals, it’s important to know the differences in double net vs triple net leases, and other lease types. Here’s a closer look at how single and triple net leases are often structured to help you see the full spectrum of net lease deals in comparison with one another.
Single Net Lease
A single net lease requires that the tenant assume the property taxes on the building, in addition to an agreed upon amount of monthly rent. Single net leases are less common, and oftentimes, the property owner will collect the tax amount and handle the payment themselves to ensure it’s handled in full and on time. Single net leases do not pass along any other expenses, so the owner becomes a landlord and must also handle all expenses and maintenance for the property.
Triple Net Lease
A triple net commercial lease, also known as an NNN lease, is an agreement between a property owner and a tenant where the tenant absorbs all the costs and expenses for the property, including:
- Monthly Rental Fees for the Building or Space
- Property Taxes
- Insurance Premiums
- All Maintenance, Upkeep, and Repairs
Sands Investment Group is knowledgeable in all types of net leases and have the expertise to guide you through all the pros and cons of your investments (in fact, we’re the fastest growing net lease investment company in America, with over 1,700 transactions in 48 states (to the tune of $4 Billion) since 2010.)
Want to learn more about NNN properties for sale and speak with an industry expert about current investment opportunities? Get in touch with an expert today by calling 844.4.SIG.NNN or sending us an email at info@SIGnnn.com.