Triple Net Lease
NNN leases, also referred to as triple net leases, are becoming more and more popular with real estate investors who do not want the headaches of the expenses and maintenance that often goes along with owning investment property.
At Calkain, we have a large portfolio of triple net lease properties available and our consultants can meet with you and discuss how this type of investment could be the best option for you.
Types of Leases
There are several types of leases that a property owner can enter into with a tenant. A gross lease is one where the owner pays all of the property taxes, insurance, repairs, and maintenance of a building. Typically, the rent in this type of lease is higher because the owner uses the extra funds to cover the building’s expenses. In some cases, utilities may be included in the rent or the tenant may be responsible for all or some of those utility costs.
In a percentage lease, the rent is based on one of four factors:
- A percentage of the tenant’s gross sales
- A set monthly rent plus a percentage of the tenant’s gross sales
- The higher of a percentage of the tenant’s gross sales or a fixed rent amount
- A minimum fixed rent amount along with a tiered-percentage of the tenant’s sales
Triple Net Lease
In a triple net lease, the tenant is the party who is responsible for the building expenses. It is the tenant who pays the property taxes and the property insurance. They are also responsible for all maintenance and repairs the property may need. This is in addition to the monthly rent. Typically, however, the rent is lower in a triple net lease than in a gross or percentage lease situation.
One benefit to the property owner in a triple net lease is that the tenant is responsible for all property taxes on the building. In the majority of municipalities around the country, property taxes increase every year, but instead of the owner having to pay the bigger tax bill, it is the tenant who writes out that check. One thing to consider, however, is that if the tenant contests the amount of the tax bill, only the property owner would actually be able to legally contest the town or city’s appraisal amount of the property. It is that amount that the tax bill is calculated by.
An NNN lease also requires the tenant to pay all costs associated with carrying liability insurance on the building. They would also likely be responsible for any deductible that the insurance company charges in the event a claim is filed.
Property Maintenance and Repairs
If the property is in good condition, then a potential tenant will be more open to a triple net lease, knowing that the roof, HVAC system, or other systems in the building are not in disrepair. But it is also up to the tenant to maintain that good condition by taking proper care and having preventative maintenance to systems done. This should all be outlined in the triple net lease.
To find out more about how a triple net lease could benefit you, call Calkain today.Are You Considering a Triple Net Lease?