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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. In a triple net lease, the 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. Shopping centers, office buildings, industrial parks or free-standing buildings operated by restaurant chains or banks are the commercial properties under the triple net lease, with a typical lease term agreement of ten to fifteen years in a built-in contractual rent escalation. There are a lot of benefits triple net investments can bring to an investor such as long-term and stable income with capital appreciation of the property. The management is free from management responsibilities, a long-term lease to a qualified tenant, attractive financing, stable cash flow, and unique tax benefits which only real estate provides. Triple net investments appeal to part-time investors who are looking for guaranteed income without management responsibilities, and it serve an attractive exit strategy for those with portfolios that are mature.

As with any other forms of investment, you know as an investor that there are associated risks, so you need to consider important things when structuring and valuing the deal. It is very important to assess the health and quality of a tenant’s business, ensuring the financial strength or financial capability. When it comes to evaluating your tenant, the different criteria you need to consider may include the operational margin, debt to equity ratios, a number of stores, the stability of management, 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. Just contact us by checking our details in our website’s homepage if you are looking for triple net investment.