Commercial real estate investments are a lucrative source of earning. As long as you work with the right commercial real estate brokers, you’ll be able to find the perfect property to invest in and add to your portfolio. However, when you offer these properties to businesses to lease, which lease option do you choose?
You can choose from several lease options available for commercial real estate owners or investors when making an offer:
- Single Net Lease (N)
- Double Net Lease (NN)
- Triple Net Lease (NNN)
Single Net Lease is only applicable to multifamily properties in commercial real estate; therefore, it is better to focus on the other two. If you want to learn about Double Net Lease, check out this blog post. Let’s discuss the properties of a Triple Net Lease before we explore why it is the best choice.
What Is a Triple Net Lease?
A triple net lease is the type of lease where the tenant bears the burden of basic rent, monthly property taxes, insurance, and maintenance. The property owner or investor can simply choose to operate passively, collecting their income, while the tenant manages the remaining aspects.
Because of the nature of triple net leases they often have relatively lower base rents but are overall profitable because the remaining expenses are covered by the tenant. They are also usually agreed to with binding agreements that last several years.
Which Commercial Real Estate Properties Does it Apply to?
Although you can technically put a triple lease condition on any property you are leasing , you need to use it for the ones that match it the most. Below are the most suitable properties for triple net leases:
- Restaurant buildings
- Retail Stores
- Fuel Stations
- Medical Clinics
Why Is it Beneficial for Commercial Real Estate Investors?
Several reasons why triple net leases are the best options for commercial real estate investors or owners.
1. Stable Source of Income
Although the overall rents are on the lower side considering the property type, triple net lease properties are nevertheless stable sources of income for the property investors.
2. Long-Term Contracts
Due to their nature, triple net leases tend to come with long-term contracts; this provides the investor or owner some income security.
3. Secure Clients/Tenants
Most tenants that require properties that come with triple net leases have good credit ratings and are more financially secure. Since their chances of defaulting on rent payments are low, these investments are beneficial for the investors.
4. Passive Earning
One of the most convenient parts of having a property with a triple net lease is that you can enjoy being a passive investor. The tenant is responsible for operating expenses, property tax, insurance, and maintenance. You can simply collect your earnings without worrying about the rest.
Conclusion
To conclude, a triple net lease is extremely beneficial for commercial real estate investors or owners who want to have a portfolio of stable and passive investments.
If you want to offer your property up for lease and want to set the right conditions, please contact our team. CHRE has several years in commercial real estate, and we will help you get the perfect deal.
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