There are typically three types of leases between a landlord and a tenant on a commercial property. And the most common of all is a Triple Net Lease.
What is a Triple Net Lease?
Also known as the "triple N" lease, the contract generally demands three additional payments from the tenant apart from the rent.
Generally speaking, the tenant is responsible for paying building maintenance, insurance, and property taxes.
Both- tenants and landlords prefer this type of lease for several reasons, some of which we have listed below.
Reasons for Seeking NNN Lease Properties
Here's a list of reasons why a Triple Net Lease property makes a good investment.
Ease of Choosing a Format
Believe it or not, you can utilize different formats in a NNN lease.
For example, a landlord and tenant may enter a bonded lease or a ground lease.
The former places all monetary responsibility for the property on the tenant. It includes the taxes, repairs and restructuring, insurance costs and more.
In contrast, the latter usually offers a leasehold interest to the tenant in the property. It means the tenant can even alter the land that they see fit for their purpose during their lease term. However, at the end of the lease term, all constructions are transferred to the landlord.
Usually, the Lease comes with a Longer Term
Unlike residential leases, the triple net leases are usually longer termed. On average, a triple net lease can last up to 25 years or more.
Having a longer lease term allows the landlord because there's less turnover. Besides, it gives an assured return on investment and an appreciation opportunity.
The Lease is Transferable
The best part about triple net lease properties is that you can transfer the lease. Meaning, you can put up a triple net lease for sale even if the term is not over.
This is particularly beneficial for landlords who wish not to restructure their lease every time a new tenant rents the property.
Besides, it assures a lower vacancy rate for the landlord. As a result, it also guarantees the income for the landlord.
Consistent Income Opportunity
Typically, a triple net lease is structured with a flat rent or a fixed annual increase.
Flat rent assures uninterrupted rental income, regardless of the market conditions. In contrast, an increasing rent would safeguard landlord's interests in case of inflation.
Nonetheless, in any case, the landlord can expect a consistent income over the lease term.
Landlord's Responsibilities are Minimal
Last but not least, triple net properties are especially beneficial for both the tenants and the landlords.
The landlords get to get rid of the recurring upkeep costs on the property. On the other hand, the tenants get to enjoy a lower rent for covering upkeep costs.
So, it's a win-win situation for both parties involved.
Depending upon the lease terms and, of course, the location where you're seeking a triple net property, there's hardly any shortcoming that you should be worried about.
With all the benefits that NNN properties offer to small businesses, it can just be the right thing you need to get started with your venture.