Triple Net Lease Definition
The definition of a triple net lease is a lease under which the tenant is responsible for paying the taxes, insurance and maintenance, in addition to the lease payments on a property.
Triple net leased properties are often defined as single tenant, stand-alone retail properties such as banks, restaurants (fast food and casual dining), drugstores or dollar/discount stores, however investors have the choice of a wide variety of triple net leased properties.
Net lease properties may vary by: Asset Type - They can be retail, office or industrial Tenant Credit Quality - They can be investment grade or below Lease Term - This varies from five to twenty-five years Value and Size of Property - They can be from $2,000,000 to $100,000,000 or more and from 2,000 square feet to 250,000 square feet or more, as well as a single tenant to multiple tenants.
Location of Property - They can be in small towns or in major metro areas You can define triple net properties by the ones with the strongest fundamentals as the most likely to continuously pay you income and maintain their value through any economic downturn.
Fundamentals refer to being located in a prime location with a solid credit tenant on a long lease term.
Some benefits of triple net lease properties include: Consistent cash flow - Strong credit tenants on a long-term lease give net lease investors a predictable income stream for a long period of time.
Hedge Against Inflation - These properties typically have consistent rent escalations which offer a hedge against the inflation risk.
Passive Investment - In addition to the monthly rent payment, triple net lease tenants are responsible for all operational aspects of the property (including insurance, taxes and maintenance).
This makes it attractive to investors that want ease of management.
Great for Estate Planning - The ease of management, potential step up in basis, and the consistent cash flow make NNN properties a very attractive option to investors that have estate planning considerations.
Some risks of triple net lease properties include: Vacancy risk - If the property goes vacant, it becomes 100% vacant and it is typically a single use building, thus showing you the importance of the quality of the credit of the tenant and the length of the lease term.
Bankruptcy or Default - If the tenant becomes bankrupt or defaults on the lease, it can negatively affect the cash flow and the value of the property.
Real Estate Risk - Triple net properties are not immune to risks associated with all real estate, including the potential loss in value.
If you want to define triple net lease as a risk free investment you had better think twice; however, with the right homework and close scrutiny, they can be very lucrative investments with very low risk.
Triple net leased properties are often defined as single tenant, stand-alone retail properties such as banks, restaurants (fast food and casual dining), drugstores or dollar/discount stores, however investors have the choice of a wide variety of triple net leased properties.
Net lease properties may vary by: Asset Type - They can be retail, office or industrial Tenant Credit Quality - They can be investment grade or below Lease Term - This varies from five to twenty-five years Value and Size of Property - They can be from $2,000,000 to $100,000,000 or more and from 2,000 square feet to 250,000 square feet or more, as well as a single tenant to multiple tenants.
Location of Property - They can be in small towns or in major metro areas You can define triple net properties by the ones with the strongest fundamentals as the most likely to continuously pay you income and maintain their value through any economic downturn.
Fundamentals refer to being located in a prime location with a solid credit tenant on a long lease term.
Some benefits of triple net lease properties include: Consistent cash flow - Strong credit tenants on a long-term lease give net lease investors a predictable income stream for a long period of time.
Hedge Against Inflation - These properties typically have consistent rent escalations which offer a hedge against the inflation risk.
Passive Investment - In addition to the monthly rent payment, triple net lease tenants are responsible for all operational aspects of the property (including insurance, taxes and maintenance).
This makes it attractive to investors that want ease of management.
Great for Estate Planning - The ease of management, potential step up in basis, and the consistent cash flow make NNN properties a very attractive option to investors that have estate planning considerations.
Some risks of triple net lease properties include: Vacancy risk - If the property goes vacant, it becomes 100% vacant and it is typically a single use building, thus showing you the importance of the quality of the credit of the tenant and the length of the lease term.
Bankruptcy or Default - If the tenant becomes bankrupt or defaults on the lease, it can negatively affect the cash flow and the value of the property.
Real Estate Risk - Triple net properties are not immune to risks associated with all real estate, including the potential loss in value.
If you want to define triple net lease as a risk free investment you had better think twice; however, with the right homework and close scrutiny, they can be very lucrative investments with very low risk.
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