A triple net lease (NNN) is a lease agreement that designates the lessee (the tenant), as solely responsible for costs relating to the asset being leased, and the rent fee applied under the lease.
There is a significant trend towards investing in NNN properties by investors who are seeking long-term stable income. Many investors are burnt out from the hassle of managing multi-tenanted investment properties and are looking for single-tenant, net lease properties with little management responsibilities, a guaranteed cash flow and favorable yields.
A single-tenant, net lease property is typically described as a free-standing office, industrial or retail building that is leased and occupied by one user or one company.
Net lease properties provide a passive income stream, minimal owner responsibilities & can result in significant tax savings to the owner.
NNN stands for Net-Net-Net (the three major property related expenses in commercial real estate). They are property tax, insurance, and maintenance. In a NNN lease the tenant is responsible for these expenses and the tenant, depending on the lease terms, may also pay for roof repair & exterior maintenance of the building leaving the investor with little responsibility and the ability to own properties from afar.
FACTORS TO CONSIDER WHEN BUYING A SINGLE TENANT NNN PROPERTY
- Tenant’s Credit Worthiness
- Length of the lease
- Rental escalations over the term of the lease
- The condition of the Physical Structure
- NNN properties are often 100 percent management–free and are ideal for an investor.
- You don’t have to limit your NNN investments to one geographic location.
- There are no vacancy factors, tenant improvement costs, management fees or leasing fee.
- Tenants sign leases for 10 years to 25 years so you don’t have to worry about turnover.
- You can defer capital gains taxes through a 1031 tax-deferred exchange.
- You can get financing long term with many NNN properties
Rideout Commercial Group specializes in advisory & transaction services. With our market knowledge & expertise, we will assist you in finding the right property to meet your needs. We will recommend professionals or will work closely with your attorney, accountant and your Qualified Intermediary, if it is a 1031 exchange- to ensure a smooth, trouble free transaction; from the identification of the properties to the closing.