Advantages of Investing in a Triple Net Lease Property
Commercial real estate requires a decent amount of management. If the investor decides to manage the property by him, then he’ll end up spending a fair amount of time in handling tenants, payment and other days to day issues related to the property. In many points, an investor also needs to hire a property management team to end up in costing the portion of his profit. But if the investor is planning for a steady income, then Triple net leases are the way to go.
Getting familiar with Triple Net Leases
Triple-net leases are used for different types of properties like office, industrial and retail. Under triple-net leases, all the responsibility of the property’s ongoing operating costs in exchange for a long term lease is handled by the tenant.
In a triple-net lease or NNN, the tenant of the property is responsible for the repairing and maintenance, insurance and structural components of the building such as a roof. All the operating expenses including taxes and insurance are also paid by the tenant including the monthly rent paid to the landlord.
Get Longer Terms in NNN Leases
With a triple net, unlike with other commercial properties, the investor doesn’t have the vagueness of what will happen if the tenant leaves in a few years. As NNN leases run from 10 to 20 years, with the renewable option of 5 years. These leases provide a steady income for the investor. Triple-net properties have a low tenant turnover rate, as it reduces the marketing and leasing costs.
Provides better Terms on Loans
Triple-net properties have better terms of loan because of commercial real estate lenders, like a bank or a private lender, analysis the potential of the property rather than the buyer’s credit. This fact of the lease makes these investments relatively stable and allows the bank to offer better terms, such as lower mortgage rates and down payments, than they give other real estate ventures. The lender considers these types of properties as the best commercial investment properties with some risk.
Triple-nets are exceptionally liquid, because if an investor decides to sell at some point, then they can easily find a buyer. On the opposite-slide, properties with triple-net leases are also good for property owners who want to sell existing properties and reinvest the proceeds in a 1031 like-kind exchange to defer capital gains tax.
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