Many free-standing, specialized buildings are leased to household name brands under a triple net lease agreement. Some examples of these include CVS Pharmacy, Taco Bell, Dollar General, Wells Fargo Banks, and more. In a NNN lease agreement, the tenant is solely responsible for all the costs related to the asset being leased. This would include net real estate taxes on the asset, the net building insurance, and any net common area maintenance, in addition to the rent. The tenant is therefore responsible for all the property’s expenses, both fixed and operating.
There are many benefits of running a triple net lease for the investor. First, investors will receive a steady income with relatively low risk. NNN leases typically last for at least 10 years, so investors are almost guaranteed a positive stable cash flow for that specified time. Since these arrangements are often fixed, the landlord and its investors know exactly how much income they can expect each month. These single tenant properties are also more affordable than larger buildings and other types of properties. The prices for single tenant properties are typically much lower, which enables investors to buy, fill, and earn money back very quickly and easily. Another benefit for the investors and landlord is that he or she does not need to spend too much time dealing with the property once filled. Since the tenant is responsible for the property taxes, insurance, and maintenance, there isn’t much left for the landlord to handle.
Similarly, there are benefits for the tenant when using a triple net lease. First, the tenant has more control on the property. If there is a problem with the building, the tenant does not need to contact the landlord and wait for him or her to call a professional. Instead, the tenant is able to hire anyone they want to fix the problem as quickly as possible. Second, the rent a tenant is charged is typically much lower in a NNN lease agreement. As mentioned above, the tenant is responsible for the property taxes, insurance, and maintenance. Since the landlord will not handle these aspects of the building, he or she will likely charge a lower rent. This can also be a benefit for the landlord because it will be easier to fill the building with new tenants if the charged rent is lower than other buildings. Charging lower rent makes the building more attractive to tenants, so the landlord will be less likely to have a vacant building between tenants.
Overall, a NNN investment is a great option for both the investor and tenant when choosing a lease agreement. This arrangement has advantages for both parties, making it an attractive choice in deciding how to build a business.