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Understanding Investing in Triple Net Properties

A triple net lease pertains to a type of leasing agreement that is designating the lesser as the one solely responsible to pay all related costs of the asset being leased which is additional to the rental fee applied under the lease. The triple net lease expenses are categorized into “three nets” which include property taxes, maintenance, and insurance. Triple net lease is also referred to as net-net-net (NNN) lease which pertains to net real estate taxes, net common area maintenance, and net building insurance. In the commercial real estate, the standard names on the different sets of costs being passed to the tenant include single net lease, double net lease, triple net lease, bondable lease, and ground lease.

Triple net leased properties are becoming popular investment medium for investors who are seeking a steady income with a relatively lower risk. When it comes to triple net lease investments, they are generally offered as a portfolio of real estate properties consist of three or more high-grade commercial properties, wherein a single tenant lease it with an existing in-place cash flow. Commercial properties under the triple net lease may include shopping centers, office buildings, industrial parks or free-standing buildings operated by restaurant chains or banks, with a typical lease term agreement of ten to fifteen years in a built-in contractual rent escalation. Triple net investments help investors gain long-term and stable income with capital appreciation of the property. Investing in a triple net property enables leasing the property to a quality tenant, freedom from management responsibilities, with attractive financing, stable cash flow, and unique tax benefits which only real estate provides. Triple net lease real estate investments are appealing to part-time investors who are finding for guaranteed income without the risks of management responsibilities, and they are an attractive exit strategy for those with portfolios that are mature.

Like any other investment, there are a lot of factors you need to consider when structuring and valuing the deal. You need to assess the potential tenant to ensure the quality and health of its business model, as well as the financial strength or capability. The different criteria you need to look for may include the operational margin, number of stores, stability of management, debt to equity ratios, and the outlook for the industry sector. You’re essentially providing a real estate capital to the business when you are leasing your property, and the success has a direct bearing on the long-term success of your triple net investment. You may contact us by checking our details in our website’s homepage if you are looking for triple net investment.