The majority of free-standing businesses, including pharmaceutical companies, banks, and your local Starbucks—are generally leased under a triple net or NNN lease agreement. These properties are usually investment properties. NNN leases tend to be the most commonly used net lease agreement for investment and retail spaces.
WHAT IS A TRIPLE NET (NNN) LEASE?
In layman’s language, A triple net lease or NNN lease is a net lease where a tenant agrees to pay all property taxes, insurance, and maintenance costs (together known as the three ‘nets’) associated with the property they’ve rented in addition to the base rent. These three nets make these investment properties more demanding among investors.
WHY SHOULD YOU CARE?
Triple net lease investments guarantee a long-term, steady source of income while providing both stability and flexibility. These investments are relatively straightforward to own and operate. Closing on a triple net investment property is undoubtedly one of the smarter investments you can make. Here’s are the reasons why:
- Get rewarded without bearing the risks.
NNN leases are one of the most secure investment opportunities available for investors. Just like bonds, single-tenant net-leased properties guarantee steady and predictable returns. The majority of NNN tenants are often big multinational companies (McDonalds, 7-Eleven, Dollar General, etc.), making them low-risk and financially stable. Plus, since NNN leases are long-term leases, the risk of re-releasing is comparatively lower than it would be with other types of leases.
- Let your profits pile up through tax deferment.
Using the 1031 and 1033 Tax-Deferred Exchange Codes, you can defer capital gains taxes and make the most of your money. In case your investment property appreciates, and you opt for a sale, then you can avoid paying taxes on your gains by investing your entire proceeds into another property. This way, you can buy bigger and better properties, which means your income and appreciation will grow exponentially. A 1031 exchange lets you gather wealth without having to pay taxes every time you make a profit.
- Freedom from management responsibilities.
The most significant advantage for triple net lease investors is that they don’t have to bear the burden of management responsibilities that often accompany a property. Since the tenants pay the maintenance expenses, insurance, and property taxes, they are responsible for paying all operating expenses that come along with the property. Therefore, the burden of managing a property is lifted from the investor’s shoulders.
Triple net leases can boost your financial situation. This type of investment provides you the opportunity to expand your bank account without the headache that usually accompanies property ownership.