What is a NNN Lease Investment?

Have you heard about investments in NNN leases? Whatever your degree of experience in commercial real estate (CRE), you might not be aware of the special advantages and security that triple net properties for sale – Net Lease World buildings offer — they are in fact one of the most reliable income-producing investment options accessible.

What exactly is a NNN lease investment, and why should you include one in your portfolio?

Investments in "NNN" Leases: An Overview

Triple net leases are referred to as NNN leases. It is a NNN lease when you buy a commercial building and/or the land it stands on and lease it back to a single tenant who agrees to pay the rent, utilities, and the majority of other costs as well as net taxes, net insurance, and net property upkeep.

Triple-net lease types

Triple net leases come in two flavours: absolute NNN and normal NNN. There is a common misconception in the NNN market that all triple net leases are absolute NNN, but this is untrue.

Total NNN LeaseAn absolute NNN lease is a long-term, corporate-guaranteed agreement between the landlord (you) and a creditworthy tenant who pays all costs related to the property. It typically lasts 10 to 20 years. Taxes on real estate, insurance, CAM, and other costs, such as capital expenditures, are among these costs. In an absolute triple net lease, the tenant bears all financial risk while you, the property owner, have no obligations other than to collect rent and go about your business as usual.

Normal NNN LeaseRegular NNN leases are also long-term agreements that often include 100% of the cost of taxes, insurance, and upkeep of shared areas. However, they may not. There may be provisions in these corporate-guaranteed leases from businesses like Starbucks, Auto Zone, DaVita, and others that call for the landlord to pay for costs like parking lots, roofs, and structures; in this scenario, the landlord is partially responsible but not significantly.

Regular triple net lease properties can be owned in any state, no matter where you live, even if they may require some maintenance fees. They are also a reliable, income-producing investment.

Ground Lease NNNA 20 to 99-year land-only rental is known as a NNN ground lease. You hold the title to the property as the investor and are the sole owner. The tenant is liable for all expenditures associated with the development and enhancement of the property, as well as taxes, repair and maintenance, insurance, and financing fees, just like with an absolute NNN lease.

If the lease is terminated early, there should be a condition that grants you control of the building. This clause helps ensure that the lease's terms are followed, and in the event that the tenant quits, the building and any additions that have increased the property's value will eventually belong to you.