The Basics of Triple Net Investments
What would it be like to have a credit worthy tenant make reliable monthly rent payments to you for an extended period of time? Net Lease investments are often called mailbox money. You are guaranteed a rent payment each month as the investor and do not have to pay any landlord costs.
A triple net lease is an agreement used for commercial properties and may also be referred to as a NNN lease. These leases are very common in single tenant properties and are ideal for investors looking for a steady stream of income over a long period of time. These investments also mean that as tha landlord, the investor does not have any responsibility for maintaining the structure or the grounds, this all falls to the tenant occupying the space. If you are considering whether a triple net lease is the right choice for your business future, you can rely on the guidance of a Net Lease Expert at Calkain.
In a triple net lease, the tenant must pay for monthly rent as well as property costs. These maintenance costs can include upkeep, janitorial duties, water, parking lots, floors, common areas, and more. A tenant may be required to make payments for the following:
Before getting into a triple net lease, the tenant should inquire further into potential costs for building repairs that are an immediate and future need. Being aware of these repairs can help the tenant prepare for such costs. A building in great condition will likely need fewer repairs than a building that is beginning to show wear and tear.
Property that has been owned by the landlord for a multitude of years is likely to have a lower property tax. This can greatly benefit a tenant who could use a little break on property tax expenses. However, if the landlord sells the property and the triple net lease is passed on, the tenant could face an increase in their property tax.
Investor Benefits of Triple Net Lease
The structure of the lease is known by the tenant and the landlord upon signing so there are no surprises over the term of the lease. All rent increases are contracted and known by both parties. This provides a stable and reliable income flow for investors that is guaranteed to occur barring a rare default or bankruptcy of the tenant.
When using an investment grade tenant in a long-term net lease, there is less likelihood of default on the lease payments as well as a contracted rent for the entire lease term. This makes it easier to determine the profitability of the lease as well as the ability to sell for an amount that returns capital and profit.
A net lease is just that, simple. As an investor you simply collect the rent check. Under a NNN lease the landlord is not responsible for any operating obligations and therefore makes the ownership very simple.