A triple net lease (NNN) is when the tenant is responsible for ALL incurred on the property. On top of the monthly base rent owed, the tenant is responsible for paying the building’s property taxes, insurance, utilities, and the cost of any maintenance or repairs. If the roof leaks, the tenant fixes it. If an HVAC system blows out, the tenant fixes it. If someone drives their car through the front of the building, the tenant fixes it. Because the tenant is covering these costs, which would otherwise be the responsibility of the landlord, the base rent charged in a triple net is generally lower than the rent charged in a gross or double net lease.
Often you will hear brokers or owners throw around the word Triple Net, when in fact the landlord does have some responsibilities. That is why you always have to check the lease! You need a smart net lease broker in your corner because an offering memorandum may not always tell the full story of a property. Everyone has their own definition, but in our opinion a true triple net lease means you as a landlord have ZERO responsibilities. All you do is collect your rent check every month and relax.
A Triple Net Lease is sought after because the lease term on new construction assets are typically 10-20 years, with strong credit backing the lease, and built-in rent escalations. A very common buyer of Single Tenant Triple Net Properties are 1031 exchange buyers who have recently sold a management intensive investment. The idea of not having to worry about anything after years of owning a large apartment building or multi-tenant shopping center is very enticing. Owners receive stable income and often the underlying real estate will appreciate in value (assuming you have bought a smart investment).