Double & Triple Net Lease Properties

What Are Double & Triple Net Lease Properties?

To understand Double and Triple Net Lease Properties, and their advantages and disadvantages, it’s useful to first understand the varying net lease types.

In a Single Net Lease, the owner/landlord must handle all the expenses and maintenance on their property, including the insurance costs, and this undermines the main benefits of Net Lease Properties, which is to mitigate that risk away from the owner/Landlord and onto the tenant. In additiona to their agreed upon monthly rental amount, the tenant is only responsible for paying the property taxes on the building. Single Net Leases tend to be the least common lease type in Net Lease Real Estate for these reasons.

In a Double Net Lease Agreement, also known as an NN lease, the tenant (in addition to monthly rent) is required to pay both (1) Property Taxes and (2) Insurance Premiums and Claims on the Property. This shields the owner/landlord from increases in those costs during the life of the lease. The property owner/landlord is however, still responsible for handling all the building upkeep and maintenance of the property. Hence this is more suited to a local owner, or one that has a great local property maintenance team, but these type of Net Lease Properties carry higher risks and potential headaces for the owner/landlord. Usually because of this, the gross rental is higher than with a Triple Net Lease, to compensate the owner/landlord for these additional costs.

Triple Net Lease Properties are the most popular with remote, foreign and passive type of investors. A triple lease, which is also known as an NNN lease, is an agreement between a property owner and a tenant where the tenant (in addition to a monthly rental fee of the building or space) absorbs all the costs and expenses for the property, including:

• Property Taxes
• Insurance Premiums
• Maintenance, Upkeep and Repairs (but may exclude the structure and roof)

Triple Net Lease Properties come in two varieties. A Standard Triple Net Lease and an Absolute Triple Net Lease, also known as a bondable lease. The only significant difference between the Standard Triple Net Lease and the Absolute Triple Net Lease, is that with an Absolute Triple Net Lease, the tenant is also responsible for the maintenance of the the structure and the roof. Hence Absolute Triple Net Leases are the most advebtagious for remote, foreign and passive type of investors, but also tend to be fairly rare and tend to yeild lower gross rental returns.

Benefits Of Double Net ('NN') & Triple Net ('NNN') Lease Properties To Owners/Investors/Landlords

Both NN and NNN Lease Properties offer significant benefits to Owners/Investors/Landlords. The most obvious of which is risk mitigation from landlord to tenant. Here the Absolute NNN Lease Property is the crème de la crème. Other benefits to Owners/Investors/Landlords are:

• Guaranteed, Long-Term Occupancy. Net Leases are structured to offer long-term tenant occupancy (which is often upwards of 30 years), which is beneficial an investor, because it diminshes vacancy risk between tenants. Often the lease is structured with an inital 10 to 20 year term, and then three to five renewable options, that usually are for 3 to 5 year terms each, often with a base rental increase built into the renewal option. Hence some of these properties may provide for the same tenant staying putt for 40, 50 or even 60 years.


• Reliable Income Stream. Net Leases helps secure a reliable income stream from an investment property. Deals are structured to include a consistent amount of rent each month, over an extended period of time, and passing along all the property expenses to the tenant helps protect an investment from unknowns and surprise costs.


• Little to No Landlord Duties. Specifically with NNN Leases, these investments are essentially 'maintenance free' for the investor. Even with a Standard NNN Lease, expenses like stucture maintenance and roof replacement may only be required every 20 to 30 years, and these can be budgeted and provided for over time.


• Funding & Leverage As the investor owns real property, returns on these properties can be leveraged by giving a lender a first mortgage on the property. Lenders also tend to be more concerned about the calliber, type of business and security of the tenant, rather than that of the investor. This enables US Residents and Citizens, as well as approved foreign investors, to fairly easily borrow against these assets and leverage their returns. More detials about Financing Options can be found under the 'Main Menu/Finance Options' tab.

Benefits Of Double & Triple Net Lease Properties?