Triple Net Leases
Everything you Need to Know about Triple Net Leases
What is a triple net (NNN) lease?
A triple net lease (NNN) is a lease agreement that assigns responsibility to the tenant to pay the rent as well as all the costs associated with the space being leased. NNN agreements require that the tenant pays for these three costs (in addition to rent):
- The net property taxes
- The net building insurance
- The net maintenance of the common area
What are the benefits if a NNN lease and who benefits?
Tenant Control of Property and Minimal Property Management
With a NNN lease, tenants have more authority over the property they reside in. For example, if the tenant wants to improve or change the physical appearance of the property, they do not have to contact the landlord and ask for their permission. The tenant has the authority to hire professionals to repair or update any systems or appliances in the property they live in without consulting the landlord. This authority makes the tenant feel like the owner of the building, rather than just a renter.
Landlords are left being able to enjoy the luxury of minimal management of the property. Considering that a NNN lease stipulates that the tenant is responsible for the property taxes, insurance, and maintenance, there is not much for the landlord to worry about. A NNN lease is the perfect option for a landlord with a full-time job and does not have the extra time to dedicate to managing a property.
Stable Stream of Income
NNN leases greatly benefit landlords because they produce a predictable and steady stream of cash flow. Owning property is accompanied by fluctuating property taxes and insurance rates with maintenance being the most unpredictable expense. By transferring these expenses over to the tenant each month, the landlord knows exactly how much income to expect each month, and that number never fluctuates. Unlike regular leases, which usually last up to a year, NNN leases are generally set for longer periods of time. A longer lease awards the landlord security in the long run. Landlords don’t have to worry about potential vacancies, rent renewals, or negotiating rent adjustments.
In a NNN lease, tenants are often awarded lower than market rents because they are obligated to pay for the property taxes, insurance, and maintenance in addition to rent. Landlords also benefit from offering lower rents because then they are less likely to experience a vacant unit.