What is a net lease investment?

What is a net lease investment?

A net lease is a lease structure that places the responsibility of building expenses on the tenant, in addition to the rent paid. Those operations costs include property taxes, insurance, and maintenance; creating a passive income stream for the landlord.

What are the three types of net leases?

Net leases are commonly used in commercial real estate. There are three main types of net leases: single net leases, double net leases, and triple net leases. When a tenant signs a single net lease, they pay one of the three expense categories: taxes, maintenance, and insurance fees.

How big is the net lease market?

Citing data from Real Capital Analytics, CBRE says net lease comprises 15.4% of total commercial real estate investment volume. The net lease share of all investment activity rose to 14.7% in 2020. In 2009, during the Great Recession, it reached 15.1%.

Who owns the building in a triple net lease?

You then use this money to pay the mortgage if there is one, and everything left over is your cashflow. That is what we call a triple net lease, where Starbucks does not own the building, they’re just the tenant, and they pay you a lease payment and cover all of the expenses.

Is NNN lease a good investment?

NNN leases are considered to be one of the most secure investment opportunities. This is because, similar to bonds, single-tenant net-leased properties provide steady and predictable returns over time.

Who pays for structural repairs in a triple net lease?

The triple net lease requires the owner to shoulder the cost of structural repairs. That responsibility makes it essential that the lease defines the projects that will be considered maintenance versus structural repairs. One can make an argument that replacing a roof is a repair or a capital expenditure.

Which expense is paid by the property owner 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.

Are triple nets negotiable?

Absolutely not! There are many areas where a tenant can negotiate a NNN lease to make it more favorable. 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.

Is a triple net lease a good idea?

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.

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