Management-free investment is what most investors seek. Nobody likes to get disturbed by midnight calls reminding them of dues on their property. A part of real estate investment is property management. However, as a property gets old, it requires maintenance on a regular basis which requires a significant amount of money and time. An alternative to management-free investment is a NNN lease investment.
NNN Lease Investment –
A triple net or NNN lease is a single-tenant arrangement that requires the tenant to pay all operating expenses associated with the property that they have rented. In a NNN lease, the tenant is mainly responsible for paying three property expenses that include insurance fee, property taxes, and maintenance cost. Generally, in a gross lease, the tenant only pays the rent which is then used by the investor or property owner to pay all operating expenses. However, a NNN lease lifts this burden from the investor’s shoulders by asking the tenant to cover the operating expenses associated with a property. NNN lease requires a long-term commitment, which could last for even more than 10 years.
Modified and other Net leases –
Not every net lease requires the tenant to pay all operating expenses. Some net leases may require the tenant to pay one or a couple of property expenses. For example, a double net or NN lease requires the tenant to pay two property expenses along with the base rent. The two operating expenses that the tenant bears in a double net lease include insurance fee and property taxes. Whereas, the investor is responsible for looking after the maintenance of the property.
On the other hand, a single net lease requires the tenant to pay any single property expense along with the base rent. Here, the tenant could either pay the insurance fee or property taxes, whereas, the investor takes care of the other two expenses. Then comes the Modified Net Lease.
A modified Net lease is an amalgamation of a triple net lease and gross lease. Under a modified net lease, the maintenance cost of a property is split between the investor and the tenant. Whereas, the tenant is responsible for paying the other two expenses – insurance fee and property taxes. A modified net lease ensures that the tenant is not burdened with too many responsibilities. That’s why the majority of tenants prefer modified net lease over other net leases.
Why modified net lease is the demand of the present hour?
Though a triple net lease is definitely more profitable for investors, a modified net lease takes care of the tenant’s interests as well. As a modified net lease reduces the burden from a tenant’s shoulders to some extent by splitting the maintenance expense between them and the investor, it attracts more tenants than any other net lease. However, that’s the only relief tenants get under a modified net lease. They still need to cover other operating expenses such as insurance fee and property taxes.
A modified net lease is a complex structure and requires the assistance of an advisor or expert. To speak to an advisor, you can call 888-993-2835 or email us at email@example.com