Understanding Investing in Triple Net Properties
A triple net lease pertains to a type of leasing agreement that is designating the lesser as the one solely responsible to pay all related costs of the asset being leased which is additional to the rental fee applied under the lease. In a triple net lease, the expenses are categorized into “three nets”, which include property taxes, maintenance, and insurance. Triple a net lease is also called as net-net-net (NNN) lease that relates to net real estate taxes, net common area maintenance, and net building insurance. In the commercial real estate, the standard names on the different sets of costs being passed to the tenant include single net lease, double net lease, triple net lease, bondable lease, and ground lease.
Triple net leased properties have become increasingly popular for those investors who are looking for a steady income with a relatively lower risks as compared to other forms of investments. A triple net lease investment typically offer a portfolio of properties comprising of three or more high-grade commercial properties, wherein a single tenant fully lease the property, with current in-place cash flow. The different commercial properties may include shopping malls, office buildings, free-standing buildings operated by restaurant chains or banks, or industrial parks, with a lease term of ten to fifteen years. Triple net leased properties offer a lot of benefits to investors that include long-term and stable income with capital appreciation of the property. Investing in a triple net property enables leasing the property to a quality tenant, freedom from management responsibilities, with attractive financing, stable cash flow, and unique tax benefits which only real estate provides. A triple net investment is appealing to a part-time investor who is looking for a guaranteed income without the risks of management responsibilities, and it is an attractive exit strategy for those with matured portfolios.
Like any other investment, there are a lot of factors you need to consider when structuring and valuing the deal. It is very important to assess the health and quality of a tenant’s business, ensuring the financial strength or financial capability. The different criteria you need to look for may include the operational margin, number of stores, stability of management, debt to equity ratios, and the outlook for the industry sector. In a triple net investment, you are actually providing a capital to your tenant’s business, and the success has a direct bearing on the long-term success of your triple net investment. Just contact us by checking our details in our website’s homepage if you are looking for triple net investment.