A Triple Net Lease or Net Lease (NNN) investment is a type of real estate investment. It involves a single tenant occupying a free-standing facility and taking on the responsibility of ongoing property expenses. These expenses include real estate taxes, maintenance costs, and insurance costs, in addition to the cost of rent and utilities. As such, a triple net lease investment can be described as a bond-like investment encompassed by real estate.
Triple Net Lease investments have gained popularity among investors who desire a steady low-risk income. These are generally offered as a group of high-end commercial properties such as malls, office buildings, etc. They are leased to a single tenant with existing cash flow.
Benefits of Triple Net Lease Investment
There are a number of benefits of triple net lease investment:
- Investors can rely on long-term stable income, along with the possibility of the property’s appreciation of value over time.
- It’s a low-risk and low-involvement investment. The investors can invest in high-end real estate without worrying about management concerns. They don’t have to look into leasing fees, vacancy factors, tenant improvement costs, etc.
- After the sale of property, the investors can simply put their capital into another triple net lease investment.
How is a Triple Net Lease Investment Structured?
A Triple Net Lease investment is structured in three ways:
- Sale-Leaseback Financing: This is structured through the sale of a property owned by a tenant. The tenant can sell the property to an investment group and lease it back on a long-term lease.
- Sale of Triple Net Lease (NNN) Property: The sale of an existing NNN property leased to a tenant-owned by a third party investor.
- Build-to-Suit: A developer enters into a long-term agreement with a corporate
tenant and then sells the transaction upon completion of the development or before.