Are you a real estate investor that’s getting tired of management headaches? Perhaps you’re tired of constant complaints by your tenants and even property destruction? Commercial triple-net lease property (NNN) is a great vehicle to give you a secure and predictable investment.
Some of the great aspects of investing in commercial triple-net lease property is that it requires very little or no management, low risk, and it gives you a predictable income per month from the lease payments. You can also specify in the lease agreement to have rent increases. This allows you to have a hedge against inflation.
A triple-net lease property is a lease agreement on a property where the tenant (or lessee) is paying all of the real estate taxes (net), building insurance (net), and common area maintenance (net) on the property in addition to any normal fees expected under the agreement, such as rent. The tenant is occupying the property, operating their business on the property, paying rent and all of the property operating expenses.
How is this different from residential real estate investing? Investing in a commercial property under a triple-net lease agreement to tenant is a total management and headache-free investment. In many real estate investments, such as apartments, single family homes, storage facilities, and office buildings, you as the owner of the property must pay operating expenses and perform property management duties. In a triple-net lease agreement, the tenant has agreed to take care of all this for you in return for a long-term lease agreement.
How do commercial tenants differ from residential tenants? With apartment renters, you may run into those tenants that will abuse your property and then move out, leaving you with the task of rehabbing the property and going through the trouble of finding new tenants. Commercial tenants have a vested business interest in making sure that the location they are renting is in constant good condition and attractive to their customers. In commercial investments, your tenants have an economic incentive to make sure your property is maintained and even enhanced over time.
What are some examples of triple-net leased properties? Take a look around most busy intersections. Denny’s, Checkers, Wendy’s, Firestone, Jiffy Lube, Office Max, Lowe’s, and Wal-Mart are excellent examples. The real property where these companies are located are owned by real estate investors and are then leased to these companies through a triple-net lease agreement.
Can I do a real estate exchange for a triple-net leased property? Triple-net leased properties are an increasingly common replacement property for real estate exchanges. Often, real estate investors drop their properties with intense management needs, such as multi-family homes and office buildings for the low management peace of mind of triple-net lease properties.
