Triple net properties are becoming very popular for commercial property investors. Many investors are basing their decisions on the properties to buy on whether or not they are triple net, and those putting their properties up for sale are advertising their triple net leases in order to attract buyers.
Buyers are looking for properties that are:
- Single occupant
- Relatively in good condition
- Rented by a tenant with a high rating
Investors that find these properties are often quick to jump on them, and for good reason – these types of properties are much safer investments.
But NNN investors – especially those that haven’t invested before – need to be careful about making sure that the triple net properties are actually triple net.
What to Look For
There are triple net properties, and then there are “near” triple net properties that are technically still double net. For a property to qualify as triple net, it must have all three “nets” completely covered:
- Maintenance
- Property Tax
- Insurance
There should be no expenses at all that are covered by the property owner, with all expenses in the hands of the company that rents it.
But many existing leases are not quite triple net, because they include clauses for certain parts of the structure. For example, a seller may say that they have a triple net lease, but in the fine print there is a clause that states that the owner of the property is responsible for things like floors or plumbing.
While those costs are nominal over the course of the lease, they represent the potential for a significant expense, and that means that you’re under greater risk – especially for larger commercial properties where a sudden roof problem could represent a significant financial burden.
Make sure that before you decide to purchase a triple net property that it is truly triple net, and that the basis of your purchase is for all of the right reasons. If you’ve found that property already, sign up with CRE Lender today. We link commercial property owners to lenders that are happy to provide you with the loan you need. Sign up today to find out more.
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