Real estate investors looking to invest in or lease commercial properties must pay close attention to the jargon because it can be complex and confusing. One term that will catch your eye for sure is triple net. Also known as NNN, Triple Net is a lease structure where the tenant agrees to pay the additional expenses associated with the property in addition to the base rent. These include property taxes, common area maintenance, and insurance premiums. The entire financial responsibility for the property effectively rests on the tenant. As an investor, you must know the ins and outs of triple net leases before embracing the concept for your next investment.
Triple net leases do not include all expenses
While you can expect to be free of the financial burdens pertaining to your property with a NNN lease, there are still some expenses it does not cover. For example, you will have to bear the accounting costs charged by your CPA for work related to the property. Similarly, if your attorney drafts or reviews the legal documents for the place, you cannot expect the tenant to bear the cost of their fees. Although these expenses are fairly small, you must have an idea about them. However, the arrangement may differ depending on the initial agreement with the tenant.
NNN works for the benefit of investors
Landlords prioritize NNN properties because they favor them in many ways. The arrangement cuts down your responsibilities, yet you can expect a good return on your investment. Looking for Triple net lease for sale makes sense for an investor who wants a predictable revenue stream down the years. You have the assurance of long-term leases and need not worry about pass-throughs. The stress related to property management is minimal because tenants have to resolve most issues and manage essential expenses themselves. If you have a steady income with minimal work in mind, there couldn’t be a better way to invest your money in real estate.
Investors have some responsibilities
Although the triple net lease is one of the simplest arrangements for real estate investors, you can still expect to have some responsibilities as the landlord. For example, you will have to pay a mortgage and maintain the structural aspects of the building. If there are issues with the foundation, roof, or walls, the expense of repairs and maintenance will be your responsibility. Even as tenants pay for maintenance, you will have to oversee the common area maintenance (CAM). Common areas refer to non-exclusive spaces that are used by all the tenants. These include landscaping, parking lots, elevators, lobbies, hallways, shared bathrooms, and security.
Triple net leases will generally cost more to the tenants because they have to bear additional expenses for the upkeep of the property. As an investor, you can expect the base rent to be lower, but it still makes sense because the arrangement eliminates many headaches for you. However, you need to stay ahead of your responsibilities to make things seamless and hassle-free by managing things at your end.
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