If you’re looking to get involved in commercial real estate but don’t want to deal with the headaches or risk, consider investing in a triple net lease. Many investors avoid the lucrative world of commercial real estate because they associate it with tenant hassles, unexpected expenses, and fear of leverage working against them.
Many real estate investors have become mired in common landlord concerns, such as maximizing occupancy, managing expenses, and dealing with property headaches. Triple net lease investments minimize the work and risk associated with all of these concerns and make it easier for the owner.
There are a variety of rental options available in the market today. Much like financing, we investors sometimes need to get creative with leases to maximize our investment or even close a deal. Besides the normal type of lease you may be familiar with when renting a car, house or apartment, there are a variety of leases that are common in commercial real estate and more beneficial to the investor; this is called net leases. There are triple net (NNN), double net (NN), and single net (N) leases that transfer some or all of the variable and fixed expenses of maintaining the property to the tenant, rather than the landlord. These leases impose on the tenant the burden of payment of property charges and rent.
There are single net leases that ensure the tenant pays property taxes in addition to their rent. Double net leases require the tenant to pay rent, taxes and insurance. The best lease for investors, however, is the triple net lease. This magical gift from the lease fairy charges the tenant with the payment of rent, taxes, insurance and maintenance. With this agreement in place, the investor does not have to worry about paying all the expenses normally associated with the property.
Some tenants may not like the idea of ​​a triple net rental investment. Many cite that with this type of agreement in place, their costs can be difficult to calculate or predict. For example, if they are responsible for repairs and maintenance, their costs may increase by a month. Unlike regular leases where the tenant would always know their fixed rental costs, the triple net lease exposes them to variable costs that they may not be able to predict.
But on the other hand, a triple net rental investment does not only benefit the investor. Tenants in a triple net lease will benefit from lower fixed rents. The situation works better in their favor in a new building. Here, they will benefit from lower rent as well as reduced maintenance and repair costs due to the age of the building.
Of course, a triple net lease works better for us investors. This frees you from many expenses that normally have to be deducted from our income. In addition to the financial burden, investors are freed from worrying about covering these costs, paying bills, etc. All you have to do is make sure tenants pay on time and you’re golden!