Should You Invest in NNN Lease Properties Or Not?

Owning and managing a rental property isn’t as easy as it may seem to be. Under a gross lease, the investor or property owner needs to invest a considerable amount of time and money in managing their property. The tenant only pays a flat rent, which is then used by the property owner for paying all operating expenses associated with the property. This way, the property owner needs to spend a part of their income in managing their property. Initially, things like rising maintenance expenditure may not trouble an investor. However, it could get troublesome after some time. That’s why investors choose to invest in nnn lease properties.

What is a NNN lease?

A triple net or NNN lease is a single-tenant arrangement that requires the tenant to pay all operating expenses associated with the property they’ve rented. Instead of a flat rent, NNN tenants pay the insurance fee, property taxes, and maintenance cost of the property along with the base rent. This kind of lease agreement requires a long term commitment and may lock the tenant for 10–25 years.

Benefits of investing in NNN lease properties -

· The biggest advantage of NNN lease investment is that it shifts the burden of property management from an investor’s shoulders to the tenant’s. As NNN investors don’t need to pay the property bills, they make big savings on the income.

· 1031 exchange investors can reinvest their proceeds in NNN properties and defer up to 100% capital gains tax. NNN investors can also withdraw their proceeds and reinvest it in some other properties or assets using a 1031 exchange.

· The majority of NNN tenants are big established multi-national companies. Therefore, the risk of default isn’t high in a triple net lease, and NNN investors enjoy a regular flow of income for a long time.

· NNN properties can be found throughout the entire USA. Therefore, by investing in NNN properties, investors get an opportunity to expand their investment geographically.

How Net leases differ from each other?

Yes, you read that right. Not every NNN lease requires the tenant to pay all three property expenses. Only an absolute NNN lease requires them to pay the three operating expenses — insurance fee, property taxes, and maintenance cost (known as the three nets). On the other hand, a double net or NN lease requires the tenant to pay any two operating expenses along with the base rent. These two expenses could be insurance fee and property taxes, whereas, the investor still pays for the maintenance of the property. Similarly, a single net lease or just Net lease requires the tenant to pay one operating expense in addition to the base rent.

What do experts think about NNN lease properties?

There is no doubt that NNN lease benefits property owners more than the tenants. While property owners don’t need to spend a single penny on the maintenance of their property, tenants enjoy a little relaxation in the base rent and full control over the property. Though you may find NNN lease investment attractive, you must talk to a NNN expert before investing.