As a type of lease agreement, a triple net lease involves the lessee as the one solely responsible for all related costs of the asset being leased which is additional to the rental fee applied under the lease. The expenses include insurance, property taxes, repair, maintenance, utilities, operations, and other items. Triple net lease is also commonly referred to as net-net-net (NNN) lease relating to net real estate taxes, net common area maintenance, and net building insurance. In the commercial real estate, the standard names on the different sets of costs being passed 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. Triple net lease investments are normally offering a portfolio of properties which consist of three or more high-grade commercial properties which are fully leased by a single tenant with current in-place cash flow. Shopping centers, office buildings, industrial parks or free-standing buildings operated by restaurant chains or banks are the commercial properties under the triple net lease, with a typical lease term agreement of ten to fifteen years in a built-in contractual rent escalation. There are a lot of benefits triple net investments can bring to an investor such as long-term and stable income with capital appreciation of the property. If you invest in a triple net property, you have freedom from management responsibilities, you can lease the property to a qualified tenant, you receive a stable cash flow, with attractive financing, and unique tax benefits which only real estate provides. Triple net investments appeal to part-time investors who are looking for guaranteed income without management responsibilities, and it serve an attractive exit strategy for those with portfolios that are mature.
As an investor, you know that like any other investment, there are many factors you need to take into consideration when structuring and valuing the deal. it is crucial to assess the quality or health of your tenant’s business, making sure that the tenant is capable of sustaining his business, with financial strength and capability. The different criteria you need to look for may include the operational margin, number of stores, stability of management, debt to equity ratios, and the outlook for the industry sector. 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. You may contact us by checking our details in our website’s homepage if you are looking for triple net investment.
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