What is NNN Lease Properties?
NNN properties are a form of discrete structures that are leased out for a stipulated period ranging from 10 years to 25 years. NNN possessions offer many advantages.
The best out of the lot is the profit of zero management accountability because the management of the property is not in the hands of the owner; it lies in the hands of the tenant. The stockholder is a benefit since they get their rent without any forced involvement.
Triple Net (NNN) Lease
NNN Lease Properties abbreviated as Net Net Net, or Triple Net is a term used in the real estate business across the nation. Net Lease Property arrangement refers to the owner and tenant relationship. Under the NNN lease properties, a tenant is required to pay a fixed amount of rent to the owner for the rented/leased property. It is the tenant who has to bear all the recoverable expenses associated with that property making it a favorable deal for the owner.
The lease type directly depends on the number of items included which varies from a single net, double net to triple net leases. The three common types of expenses charged in this industry are often called “three nets,” named as the property taxes, insurance, and maintenance.
- Property Taxes
Get Current 1031 Exchange Property list
Triple Net Lease Properties Timeline
How do you define NNN Lease into simpler terms?
We all are aware of financial markets to be a risky business; they are highly unpredictable which forces investors to opt for the safest mode of investment. Hence, they choose for NNN Lease as the most reliable mode of investment which can generate a regular monthly income with a reasonable chance of no loss when it comes to the principal amount being protected from any damage in future. It is challenging to find fixed-income options, so it is advisable to adopt smart alternatives such as investing in a single-tenant form of NNN leased properties.
What is the requirement for the NNN Lease?
There are various types of real estate investment properties which range from retail, office and industrial buildings which are generally leased out to a single company. The tenant lock-in period is usually longer (it can be 10, 15 or even 25 years longer). The leases have generally smaller rental escalators (annual increases) which profit the investor and prevent him from paying a huge hedge against inflation. In the commercial form of real estate, the requirement of the tenant and the landlord alters the type of lease.
How come NNN Lease came into existence?
NNN (“triple net”) leases and full-service leases are the most common type of commercial leases. A tenant sealed under “NNN Lease” is responsible for some things such as real estate taxes, rent, and zero maintenance for the owner, insurance and providing the owner with a monthly tenant.
Investors are always on the lookout for zero management of real estate investments. Investors don’t want to spend hours on property maintenance, supervision, and tenant leasing type hectic responsibilities. It is for this reason investors opt for single-tenant occupancies which are much more comfortable.
The NNN lease option is a highly favorable option for various investors who are looking to invest their substantial net worth safely. Along with zero maintenance responsibilities, NNN lease also offers a way to defer from the capital exchange via 1031 Exchange.
What are the benefits of the NNN Lease?
NNN Lease is a simple form of investment promising regular returns. Under NNN lease under 1031 Exchange; the Investors have the upper hand always on the lookout for high credit quality tenants and corporate-backed lease. Investors enter into long term leases with the high-grade tenants who help them in shifting the financial burden which includes insurance, repairs, maintenance costwhich can create risks into these investments.
Triple N form of 1031 exchange can be combined with Delaware Statutory Trust (DST) to attain more significant and better returns. Where NNN is a risk-free investment, Delaware Statutory Trust (DST) allows the investors to take pleasure of the benefits of owning their real estate property without dealing with the day-to-day responsibilities of actively managing real estate. With a combination of DST and NNN, the investors can enjoy zero management benefits along with 6-7 percent returns every month. NNN demands a large amount of equity for purchase which can be compensated and managed with DST. Investors can ensure their property is maintained and operated with high-credit tenants. The professional management of capital is an investor’s disposal. The NNN 1031 Exchange enables investors to keep their property under their control.
Some of the other advantages of NNN Lease are given below
- The investor gets static and regular income
- The Minimum equity of 1 million dollars is required
- The Investor enjoys rent benefits in a hassle-free manner
- A simple lease agreement is formed between the landlord and tenant
- In NNN Lease, no third party like Qualified Intermediary (QI) is needed
- The Maintenance is done and managed by the tenant only, and Investor enjoys zero management responsibilities
- The investor is given the right to cancel the contract if the tenant hasn’t paid the rent for three months in a row.
What is the market value of the NNN Lease?
You can invest any time into NNN Lease properties as it is not a risky form of investment. The professionals have property available at a price of less than $1 million to more than $10 million.
The market value of single- tenant NNN lease asset depends on various factors such as:
- Lease length
- Creditworthiness of Tenant
- Increase in rent over time
- Location and Quality of the property
What are the risks associated with the NNN Lease?
Even though the NNN lease is risk-free, but there are a few risks related to finance and maintenance for the landlord as well as the tenant.
- Continuous payment of rent even after property condemnation
- Error-prone invoices
- Late or irregular rent payments by the tenant
- Obligated to rebuild post any natural disaster
- Low maintenance levels by the tenant
- Illegal happening on your property
- Inability to cancel the contract under any circumstances
- No authority to ask for any rent changes