What is a triple net lease REIT?

A triple net lease (triple-net or NNN) is a lease agreement on a property whereby the tenant or lessee promises to pay all the expenses of the property, including real estate taxes, building insurance, and maintenance.

Is a triple net lease a good idea?

The most obvious benefit of using a triple net lease for a tenant is a lower price point for the base lease. … Successful properties with low vacancy rates also make triple net lease attractive for a tenant as the taxes, insurance, and maintenance costs are divided by a greater number of fellow tenants.

Who pays what in a triple net lease?

In a triple net lease (also referred to as a “NNN” lease), the tenant pays all expenses associated with the property. This includes real estate taxes, building insurance, maintenance (including structural repairs), rent, and utilities.

What does landlord pay in triple net lease?

With a Triple Net Lease—sometimes referred to as “NNN”—the tenant assumes responsibility for all costs of the property, in addition to paying the rent. The tenant pays the utilities, real estate taxes, building insurance, and maintenance.

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Is NNN lease a good investment?

NNN properties make great investments for the right kind of investor. If you’re wanting to work full time in commercial real estate and are looking to grow your portfolio aggressively or benefit from significant value-add, then investing in NNN properties likely won’t be the best path for you.

Are triple nets negotiable?

Just because it is labeled as a triple net lease, does not mean that you cannot bargain and negotiate for different terms that better suit your needs. For instance, the parties to a triple net lease can negotiate for “caps” on certain expenses, such as maintenance repairs or property taxes.

Are triple net leases bad?

The Good: For the tenant, the triple net lease can be great. A tenant has more freedom with the structure and can better customize a space for use WITHOUT the capital investment of a purchase. The tenant pays less for rent, as they have incurred other expenses.

Does a triple net lease include utilities?

With a triple net lease, the tenant promises to pay all the expenses of the property, including real estate taxes, building insurance, and maintenance. These payments are in addition to the fees for rent and utilities.

How do you negotiate a triple net lease?

There are many areas where a tenant can negotiate a NNN lease to make it more favorable. First, the base rental amount becomes a key negotiating term. If the tenant is taking on all responsibility and risk of the landlord’s overhead, then the tenant may be able to negotiate a more favorable base rental amount.

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What is the difference between a gross lease and a triple net lease?

Tip. Under the terms of a triple net lease, a tenant must pay rent and all operating costs related to the property. Under the terms of a gross modified lease, a commercial tenant pays some, but not all, of the operating costs.

Who pays expenses in a net lease?

In a net lease, the tenant pays a portion or all of the taxes, insurance fees, and maintenance costs for a property in addition to rent. Net leases are commonly used in the commercial real estate sector.

What is the average NNN rate?

The estimated operating expenses (aka NNN) are $10 per square foot per year. The total yearly rent you would pay equals $40 sf per year. So if you are leasing 3,000 sf then your yearly rent would be $120,000 or $10,000 per month.

How do NNN leases work?

On an NNN lease, tenants pay additional expenses in addition to the lease fee, to the landlord or lessor. … The landlord includes the totals for property taxes, insurance, maintenance and common area upkeep and then divides the sum by 12 to arrive at a monthly cost.

What is the purpose of NNN?

With a triple net lease (NNN), the tenant agrees to pay the property expenses such as real estate taxes, building insurance, and maintenance in addition to rent and utilities. Triple net leases are commonly found in commercial real estate.