A triple net lease refers to a leasing agreement which designates the lessee in which the tenant is primarily responsible for all the associated costs of the asset being leased, in addition to the rental fee which is applied to the lease. The expenses include insurance, property taxes, repair, maintenance, utilities, operations, and other items. Triple net lease is also referred to as net-net-net (NNN) lease which pertains to net real estate taxes, net common area maintenance, and net building insurance. The standard names in the commercial real estate industry on the various sets of costs which are passed on to the tenant include single net lease, double net lease, triple net lease, bondable lease, and ground lease.
There is an increasing popularity of triple net leased properties most especially for investors who are searching for a steady income with a relatively lower risks as compared to other forms of investments. When it comes to triple net lease investments, they are generally offered as a portfolio of real estate properties consist of three or more high-grade commercial properties, wherein a single tenant lease it with an existing in-place cash flow. The different commercial properties may include shopping malls, office buildings, free-standing buildings operated by restaurant chains or banks, or industrial parks, with a lease term of ten to fifteen years. Triple net leased properties offer a lot of benefits to investors that include long-term and stable income with capital appreciation of the property. The management is free from management responsibilities, a long-term lease to a qualified tenant, attractive financing, stable cash flow, and unique tax benefits which only real estate provides. A triple net investment is appealing to a part-time investor who is looking for a guaranteed income without the risks of management responsibilities, and it is an attractive exit strategy for those with matured portfolios.
Like any other investment, there are a lot of factors you need to consider when structuring and valuing the deal. You need to assess the potential tenant to ensure the quality and health of its business model, as well as the financial strength or capability. In terms of tenant evaluation, it is important to consider the number of stores, operating margins, debt to equity ratios, outlook of the sector of their industry and stability of management. You are actually providing a real estate capital to the business of your tenant, and the success has a direct impact on the long-term success of your triple net investment. Just contact us by checking our details in our website’s homepage if you are looking for triple net investment.