What is a Triple Net Lease?
By: Justine Assal •
A triple net lease (or "NNN" lease) is a form of real-estate lease agreement where the tenant or lessee is responsible for the ongoing expenses of the property, including real estate taxes, building insurance and maintenance, in addition to paying the rent and utilities.
For example, if a property owner leases out a building to a business using a triple net lease, the tenant will be responsible for paying the building's property taxes, building insurance and the cost of maintenance and repairs that maybe required during the lease term.
In other types of leases, these 3 costs would be attributed to the property owner so it is customary that the rent charged in a triple net lease is lower than the level charged otherwise in a standard lease agreement. The capitalization rate, which is used to calculate the lease amount, is determined by the credit worthiness of the tenant.
Triple net leased properties are popular options for investors that are looking for low risk and steady income. They are usually commercial properties including office buildings, industrial parks, free standing buildings, shopping malls and maybe leased and operated by a restaurant chain or bank. Lease terms maybe from 10 to 15 years and allow for escalation of rent within the contract.
A triple net lease allows an investor to have high quality real estate investment with stable, long term income and the possibility of capital appreciation. This type of investment alleviates owner concern for management operations to include tenant improvement costs and vacancy factors.
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