Triple net (NNN) investing is a type of commercial real estate investment strategy that involves owning and leasing properties under a specific type of lease arrangement known as a triple net lease. In a triple net lease, the tenant is responsible for paying not only the rent but also the 1) property taxes, 2) insurance, and 3) maintenance expenses (CAM or Common Area Maintenance), hence the term “triple net.” This places a significant portion of the financial and operational responsibilities on the tenant, relieving the property owner (investor) from many of the typical property management duties and headaches.
Triple net investing offers several potential benefits for investors. One of the primary advantages is the potential for stable and predictable passive cash flow. Since the tenant is responsible for covering property taxes, insurance, and maintenance expenses, the investor can expect to receive the net rent after deducting these expenses. This can provide a consistent stream of income, making triple net properties attractive to passive investors seeking stable cash flow.
Another benefit of triple net investing is the potential for long-term leases. Triple net leases are typically longer-term leases, often ranging from 10 to 15 years or more, with built-in rent escalations over the lease term. This can provide investors with a predictable rental income stream and reduce the risk of frequent tenant turnover.
Triple net investing also offers potential for diversification. Properties that are suitable for triple net leases can vary greatly, ranging from retail stores to office buildings to industrial warehouses. This allows investors to diversify their portfolio by investing in different types of properties and tenants, reducing the risk associated with relying on a single type of property or tenant.
However, triple net investing also has potential risks and considerations. One of the key risks is the reliance on the financial strength and creditworthiness of the tenant. If the tenant defaults on their lease obligations, the investor may be responsible for the property expenses or face the risk of prolonged vacancy. Additionally, the property’s location, market conditions, and property management still need to be carefully considered.
In conclusion, as with any investment, thorough due diligence, careful assessment of risks and rewards, and consultation with qualified professionals are crucial to making informed investment decisions. If you have $800k liquidity and a net worth of $5m or more, NNN Invest professionals are ready to assist you with finding your next NNN property. Start Today.