Net Lease Investments

If you’re new to the industry, net lease investments can seem overwhelming. At Calkain, our goal is to help our clients understand what they’re getting into and how to make profitable business decisions. Net lease investments can be beneficial for all parties involved but it’s important to know what each party’s responsibilities are before entering into a net lease arrangement. If you’d like to know more about these innovative investments, don’t hesitate to contact us online or by phone. In the meantime, here’s a quick look at what net lease investing is all about:

Net Leases: The Basics

Net leases are agreements between landlords and tenants, and they are most common in the commercial real estate industry (as opposed to the residential real estate industry). In addition to paying regular rent payments, the tenant agrees to cover additional costs associated with the property. There are three main types of
net lease investments, each with varying types of costs.

  • Single Net Leases: These net lease agreements are fairly rare. In addition to paying rent, the tenant agrees to pay for property taxes; the landlord is responsible for all other costs.
  • Double Net Leases: In a double net lease, the tenant is responsible for covering property taxes and building insurance in addition to rent.
  • Triple Net Leases: These are often referred to as “NNN Net Leases.” Triple net leases are some of the most common net lease investments. In addition to paying rent, the tenant agrees to pay for taxes, building insurance, and maintenance fees associated with the property. This type of net lease is very common in commercial real estate agreements and it is sometimes also used in the residential real estate industry for single family units.

The Benefits of Net Lease Investments

Net lease investing tends to be very beneficial for landlords, and especially for those who manage several properties.

  1. Landlords have a steady source of income. Fluctuations in the economy are to be expected, and any seasoned investor will know that income can vary depending on market strength. However, net lease investments tend to provide steady streams of income regardless of these fluctuations.
  2. Landlords don’t have to worry about paying taxes or covering maintenance costs. Shifting these responsibilities onto the tenant can be very beneficial for a landlord. If a tenant doesn’t respect the property or care for it properly, the landlord won’t be stuck paying for high insurance or maintenance bills.
  3. Net leases allow for long-term leases, but can be customized to fit the needs of the landlord and tenant. Some net lease agreements, such as single net leases, tend to involve long-term leases. These leases could last 10, 15, or even 25 years. Successful long-term lease agreements with trustworthy tenants can be very beneficial for investors who are trying to lower their risk assessment profiles.

Tenants who agree to net leases may find that these agreements are beneficial for them as well. For one reason, landlords may be more willing to offer lower rent payments to compensate for the additional costs. Another benefit is that a tenant who cares for the property and keeps it well-maintained may find that their additional costs — such as insurance payments and maintenance fees — are very low.

Contact Calkain Today

If you’d like more information about net lease investments, don’t hesitate to contact Calkain today at (703) 787-4714.

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