Understanding Triple Net (NNN) Leases: Benefits, Drawbacks, and Finding NNN Investment Properties
Explore the essentials of triple net (NNN) leases, including their benefits and drawbacks for landlords and tenants. Learn how to effectively find NNN investment properties using dedicated online platforms, making it easier to identify structured deals that suit your financial goals in commercial real estate.
Understanding Triple Net (NNN) Leases: Benefits, Drawbacks, and How to Find NNN Investment Properties
In commercial real estate, the triple net lease, commonly known as NNN lease, is gaining increasing popularity. Despite its widespread use, many professionals and the general public still have misconceptions about this leasing structure. This article explains what a triple net lease is, explores its advantages and disadvantages, and provides tips on locating NNN properties for sale.
What is a triple net lease?
A triple net lease is an agreement where the tenant agrees to cover all operational costs related to the property along with paying rent. Each "N" in NNN refers to a specific expense category the tenant handles, such as property taxes, insurance, and maintenance costs.
In simpler terms, a single net lease involves tenants paying for one expense, a double net lease covers two, and a triple net lease requires tenants to handle all three: taxes, insurance, and maintenance.
Advantages and disadvantages of NNN leases
From a landlord's perspective, NNN leases offer stability, as the owner is shielded from unexpected costs, ensuring steady income streams. For tenants, the primary benefit is enhanced control over the property, which is especially advantageous for franchise operators wanting to customize or upgrade their space before launch. Additionally, since tenants absorb most expenses, rental rates tend to be lower.
However, tenants often face significant responsibilities, including managing operating costs, repairs, and weather-related damages. If the business experiences downturns, tenants still need to cover rent, which can be a financial strain.
How to locate NNN properties for sale
Locating NNN properties can be challenging since many listing platforms lack specific filters for NNN investments. Nevertheless, certain platforms allow targeted searches based on lease type, tenant profile, and property class. These resources can help investors find suitable NNN properties:
Reonomy
LoopNet
CREXi
Ten-X
Marcus & Millichap
