We are often asked exactly what a triple net lease is and how it differs from other common lease structures. What is typically included? Who pays for what costs? What are the advantages and disadvantages for a NNN lease? We figured it would be best to give a simple explanation of this lease structure as it is part of our brand's name.
A NNN lease, also known as a net-net-net lease, is a type of commercial lease agreement in which the tenant is responsible for paying all the expenses associated with the property, in addition to rent. These expenses typically include:
Real estate taxes: Taxes assessed on the value of the property.
Building insurance: Insurance that protects the property from damage caused by fire, theft, or other hazards.
Common area maintenance (CAM): Costs associated with maintaining and operating common areas of the property, such as hallways, elevators, lobbies, restrooms, parking lots, and landscaping.
In a NNN lease, the landlord is typically responsible for providing the tenant with a habitable space, but the tenant is responsible for everything else. This can make NNN leases an attractive option for landlords, as they offer a relatively hands-off investment. However, it is important for tenants to be aware of the potential costs associated with NNN leases before signing one.
Advantages of NNN Leases for Landlords
Reduced risk: Landlords are not responsible for unexpected expenses, such as increased taxes or insurance premiums.
Lower management responsibilities: Landlords do not need to worry about maintaining the property.
Higher net operating income: NNN leases typically result in higher net operating income for landlords, as they do not have to pay for property taxes, insurance, or CAM.
Advantages of NNN Leases for Tenants
Lower rent: NNN leases typically have lower rent than gross leases, as the tenant is responsible for additional expenses.
More control over the property: Tenants have more control over the property, as they are responsible for maintaining it.
Disadvantages of NNN Leases for Landlords
Less control over the property: Landlords have less control over the property, as they are not responsible for maintaining it.
Caps on Expense could lead the landlord paying for expenses that would be normally passed on to tenants.
Disadvantages of NNN Leases for Tenants
Higher expenses: Tenants are responsible for all the expenses associated with the property, in addition to rent.
Less flexibility: Tenants may have less flexibility to make changes to the property.
NNN leases can be a good option for both landlords and tenants who are looking for a predictable and stable lease arrangement. This is what we strive for here at NNN Income.
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