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. The triple net lease expenses are categorized into “three nets” which include property taxes, maintenance, and insurance. Triple net lease is also referred to as net-net-net (NNN) lease which pertains to net real estate taxes, net common area maintenance, and net building insurance. The standard names in the commercial real estate industry on the various sets of costs which are passed on to the tenant include single net lease, double net lease, triple net lease, bondable lease, and ground lease.
Triple net leased properties are becoming popular investment medium for investors who are seeking a steady income with a relatively lower risk. 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. If you invest in a triple net property, you have freedom from management responsibilities, you can lease the property to a qualified tenant, you receive a stable cash flow, with attractive financing, and unique tax benefits which only real estate provides. Triple net investments appeal to part-time investors who are looking for guaranteed income without management responsibilities, and it serve an attractive exit strategy for those with portfolios that are mature.
Like any other investment, there are a lot of factors you need to consider when structuring and valuing the deal. it is crucial to assess the quality or health of your tenant’s business, making sure that the tenant is capable of sustaining his business, with financial strength and 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. You are actually providing a real estate capital to the business of your tenant, and the success has a direct impact 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.
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