Imagine you’re renting out a home to a family of four. You ask the tenant to pay rent, maybe a few of the utilities, and that’s it. On a month to month basis, you do not have to be that involved. You collect on rent each month, but otherwise you needn’t concern yourself with the property.
But if anything breaks, it comes out of your account. You need to pay for a new roof. You need to pay for a new carpet. You need to pay for pest control or lawn care services. And if the tenant moves out, you have to pay to have everything replaced so that someone else can move in. It can be a lot of work, and a lot of money, and it will often take away from some of the profits that you expect out of the property.
Commercial Properties and “Net Leases”
For commercial properties, the amount of involvement from the landlord can be even worse. With so much daily use, more things break on a regular basis, more repairs need to be made, more bills need to be paid, and so on. It takes a lot of work to maintain a commercial property, along with property taxes and insurance that can add up quickly.
That’s why many commercial property owners ask the lessees to pay various “nets,” or “N.” There are three different lease types:
- Single Net Lease – This is where the lessee is asked to pay property taxes, but the owner is responsible for things like maintenance and insurance.
- Double Net Lease – This is where the lessee is asked to pay property taxes and insurance, along with possibly a bit of regular maintenance, but all other maintenance is covered by the owner.
- Triple Net Lease – This is where the lessee pays all expenses associated with the property. They pay insurance, they pay property taxes, and they pay all maintenance (from major repairs to minor needs). The property owner pays nothing.
The triple net lease, or NNN, is the most desirable financially, because it involves almost no commitments. Indeed, you may even be able to find a lessee that will sign an “Absolute NNN Lease,” which is a lease that cannot be broken, in which case you’ll be able to guarantee those payments for possibly decades.
In real estate terms, an NNN lease is one of the best possible leases you can have, and in some cases you can turn that lease into a loan so that you do not have to wait to receive the payoff. Sign up with CRE Lender to learn more about how to get instant cash from your triple net lease.
[salesforce form=”2″]