Triple Net (NNN) Lease

What is a Triple Net (NNN) Lease?

The terms “Triple Net Lease”, Triple Net Leased “Triple-Net,” “NNN,” “Net Lease,” “Net-Net-Net” are interchangeable. The definition of a Triple Net Lease (NNN) requires the tenant to pay all insurance, maintenance, and taxes. The tenant is responsible for all normal expenses of ownership, leaving the owner free of day-to-day management responsibility.

Most commercial property NNN leases are between 10-25 years and include cost-of-living rent increases. In many ways, the income stream from a net lease is like the payments a lender receives on a mortgage loan to a homeowner. Rental payment continues for the full term of a NNN lease. This makes the credit rating of the tenant very important.

NNN-1031 Investment Advantages

Here are a few benefits of an investment grade, triple NNN investment property:

Net leased properties relieve owners from the day-to-day management issues. Steady income-stream paid by an investment grade corporate tenant. A long-term lease to a corporate tenant with credit rating makes it easier to get a mortgage loan at favorable rates. NNN properties usually have high residual values because they are most often built for retailers who have researched the market to find high density, middle income areas with great traffic patterns.

Why Triple-Net-Leases (NNN) Work

Many regional and national companies choose to lease their business property. Leasing the property gives the occupying companies the ability to control their physical environment without the financial commitment of ownership. By leasing the property, companies free up their corporate funds for business expansion and improvement. The owners of the building acknowledge that the public perception, due to the company logos and signs, is that the occupants own the building. Thus, they have a vested interest to maintain the condition of the building. A Triple-Net lease gives the companies control over the property they occupy without the capital commitment of ownership.