The NNN effect or The Triple Net effect

 

WHAT IS NNN (Triple Net) and what does that mean to an investor/owner of real estate?

 

The term NNN or ‘triple net’ as it is known represents an investment property that has a commitment of a long term ( usually ) lease from the tenant, with the tenant paying the expenses of the asset property, in addition to the agreed upon rental rate.

The lease agreement designates the lessee (the tenant) as being solely responsible for all of the costs relating to the asset being leased in addition to the rent fee applied under the lease. The structure of this type of lease requires the lessee to pay for net real estate taxes on the leased asset, net building insurance and net common area maintenance. The lessee has to pay the net amount of three types of costs, which how this term got its name.

For example, if a property owner leases out a building to a business using a triple net lease, the tenant will be responsible for paying the building’s property taxes, building insurance and the cost of any maintenance or repairs the building may require during the term of the lease.The tenant is covering these costs (which would otherwise be the responsibility of the property owner).

 

NNN leases have become very desirable for investors portfolio.  They are usually long term leases with long term tenants, thus giving the investor potential security of regular income

of regular income from the investment property.

These leases may be in the industrial, retail, or office / office medical segments of the marketplace.

Another reason for the desirability of this type of asset that gives the owner /landlord ‘hands free’ management of the property, as the tenant is responsible for all costs and often all repairs.

The stock market can fluctuate, while the long-term leases, coupled with the tenant’s responsibility for expenses may make this type investment beneficial to a portfolio, when suitable.

An individuals portfolio.

 

The Triple Net properties are often desired and used for the 1031 tax deferred exchange process.

 

*See Resource Guide on this website