Want a Thiriving Business? Focus on NNN Investment!
Are you aware of the benefits of NNN investments? Here in this blog, we will introduce you with all the ways to structure a lease agreement such as Net Lease, Gross lease, NN Lease, NNN Lease, Absolute Lease, or Bond Lease. All the difference between these common structures has been explained here.
The lease structure of these agreements describes the term of the leases. In gross lease all the gross or operating expenses the landlord realizes on the property: Like maintenance costs, property insurance fees, and real estate taxes are paid by the landlord of the property. A net lease requires a rent payment that covers the operating expenses net or excluding individual costs. The more ‘nets’ the lease will have fewer property expenses the lease payment will cover. Now let’s discuss it in detail and know why NNN investments are popular among real estate investors.
Under the gross lease the tenant of the property pays a straightforward rent rate, and all the other expenses like paying estate taxes, property insurance fees, and property maintenance expenses are all paid by the landlord. It is a common residential lease structure.
Net Lease (Single Net Lease, Modified Gross Lease):
Under this lease, all the property maintenance and expenses are paid by the landlord not the tenant of the property. Here the tenant pays the rent in addition to utility costs, real estate taxes, or property insurance.
Net Net Lease (Double Net Lease, NN Lease):
In the Net-Net lease, the tenant of the property pays the rent and most of the property’s operating expenses excluding property maintenance, particularly of common areas, roof, and the basic structure. All the other liabilities of the property are maintained by the landlord and the areas that are not covered by the tenant.
Net Net Net Lease (Triple Net Lease, NNN Lease):
In NNN (Net Net Net) lease all the operating expenses, including structural maintenance are paid by the tenant. The landlord maintains the property only in case of any casualty if the property is destroyed.
Absolute NNN Lease (Bond Lease):
In Absolute NNN Lease all operating expenses are paid by the tenant of the property even in the unlikely event of casualty or condemnation.
When there are fewer “nets” in the lease agreement, then less liability and responsibility are handled by the investor. As the number of “nets” increases then tenants take the most responsibility for the property and gains control of the upkeep and the property costs. As the tenant pays the utility costs, taxes, or insurance fees directly so they are less charged for these costs when they are estimated into the standard rent rate.
Rather than property management triple net lease allows the NNN investors to focus time and capital on acquisitions, deposition, and leasing. Better profits can be estimated if investor get the idea of what the monthly rent will be and they do not need to bother about the unexpected maintenance repairs or raises in insurance costs or taxes. Triple net leases are mostly made with the credit rated tenants who are more likely to uphold long-term contracts, which generates higher long-term income and higher growth potential for the landlords.
All the information provided above has been researched and thought to be knowledgeable for you. For consultation and assistance regarding 1031 Exchanges, you can call 888-993-2835 or email us at email@example.com