Whats is Net Leased?
The Triple Net Lease (NNN) is similar to a long-term corporate bond in the form of a real estate lease. It requires the tenant to pay all costs associated with the property use and occupancy, including real estate taxes, insurance, improvements, on-site property management and maintenance. A Triple Net lease is a real estate investment where the buyer owns the land and building while the tenant, a corporate backed entity, holds a long term lease.
Triple Net Lease Advantages
- Relieve the owner from day-to-day maintenance and management issues typical of other investment related properties.
- Increase cash flow potential in the form of rent paid by an investment grade corporate tenant.
- Favorable mortgage rates result from entering a long-term lease with a credit rated corporate tenant.
- Eliminate expenses due to vacancy, management, leasing commissions etc.
Single Tenant Triple Net investment real estate properties are in high demand. Investors are keen on NNN leases due to their simple and usually profitable nature. Investors, fearful of the volatility found in today’s stock market, are trying to find more prudent investments for their hard earned money. Safe haven for many of these investors is found in real estate. Shopping centers, office buildings, power centers, strip centers, and apartment complexes all have management requirements. Single tenant triple net investments commonly have between 10-25 year leases in place and do not require management or maintenance on the part of the landlord.
For some experienced investors that have both the management know-how and available time to properly manage the investment, multi tenant properties can be very profitable. However, for some investors, single tenant investments are preferred. With single tenant investments the owner does not have to heavily consider vacancy factors that are prevalent in multi tenant office buildings, shopping centers, strip centers, power centers and apartment complexes in some geographic areas.
When comparing single tenant triple net properties with multi tenant properties, taking into account vacancy factors, management fees, tenant finish costs and leasing commissions the conservative single tenant triple net leased property is often preferred over retail by most investors.