Triple-Net (NNN) Investments
A triple-net (NNN) lease investment is an investment where an investor owns real estate that is leased to a tenant or tenants typically for a long term lease of over 15 years. Under the terms of a typical triple-net lease agreement, the tenant agrees to occupy the property and operate business while paying rent and all property operating expenses like insurance, taxes and internal and external maintenance. This takes the burden of unforeseen expenses off the investor and allows for a predictable stream of income over the term of the lease.
This type of investment is considered a passive real estate investment. This form of an investment is better as in the case of residential property, there is the chance of the tenant abusing the property before leaving. In such cases, the owner has to refurbish the property when looking for new renters. Commercial tenants are considered to be positive business renters as they have a vested interest in the property and thus see that it is well maintained and attractive to clients and customers. So with the passage of time, the owner is at an added advantage as the tenant sees some economic incentive by enhancing the property.
In addition, rent increases can be claimed in accordance with inflation. The main advantage of a triple net leased property is that the owner faces little risk, gets a monthly income through lease payments, and can also claim a rent increase with inflation. With no property expenses, or any other taxes to be deducted from the rent money, the owner receives more rent. It is also very beneficial to use a triple net leased property as a replacement property when completing a real estate exchange transition. This is because many real estate investors dispose of management intensive properties for the more management free properties like triple net leased property.
