What Is a Triple Net Lease (NNN)?
Triple net leases (or NNN) in commercial real estate, is a lease agreement that stipulates the tenant or lessee will pay expenses of the property. Insurance, taxes and common area maintenance are what the three nets represent. The cost of rent and utilities are on top of these expenses.
If you’re looking for a solid investment that will provide you with stable income and potential appreciation, then NNN investment properties may be just what you’re looking for. Commercial real estate can be a great way to diversify your portfolio and NNN properties offer some unique advantages.
Are NNN Properties Good Investments?
First, with NNN investments, you are typically not responsible for the property taxes, insurance, and maintenance expenses. This means that your income is not as directly affected by changes in the market or economy. If taxes and insurance, or repairs increase over time, those expenses are transferred to the tenant, not the owner. Additionally, NNN investment properties often have long-term leases in place, providing you with a predictable stream of income.
Another advantage of NNN investment properties is that they offer the potential for appreciation. As the economy improves, commercial real estate values are likely to increase. So, by investing in NNN properties now, you may be able to secure a good return on your investment down the road.
What Are the Best Triple Net Investments?
When it comes to finding the best triple net investments, there are a few things you’ll want to consider. The most important factors include:
1. The stability of the investment property. You’ll want to make sure that the property is in a good area with a stable economy. This will help ensure that your investment is safe and that you’ll be able to generate a good return on your investment.
2. The amount of money you’re willing to invest. Not all NNN investments are created equal, and some will require a larger investment than others. Be sure to do your research and find the right property for you.
3. The amount of work you’re willing to do yourself. Some NNN investments require more work than others. If you’re not interested in doing any repairs or maintenance, then you’ll want to find a property that doesn’t require much work.
4. The length of the lease. Most NNN leases are for 3-5 years, but there are some that are shorter or longer. Make sure you’re comfortable with the length of the lease before you sign anything.
5. The strength of the tenant – the stronger their financial portion, the less risk of them going bankrupt. Many investors look for national XX as tenants for their NNN investments. Usually, the strong the tenant, the lower the return on investments.
Can You Negotiate a Triple Net Lease?
The short answer is, yes, you can negotiate triple-net leases. Triple net leases are popular in the commercial real estate market because they offer landlords and investors high levels of certainty and stability. The downside for tenants, however, is that they can be difficult to negotiate and often come with higher-than-average rents.
When negotiating a triple net lease, it’s important to understand the terms of the agreement and to try to negotiate for the best possible deal. Here are a few tips:
Know what expenses are included in the lease agreement. Make sure you understand exactly what costs you’ll be responsible for before signing any papers.
Shop around. Don’t just accept the first triple net lease you’re offered. Talk to multiple landlords and compare offers before deciding.
Try to negotiate a lower rent. Because triple net leases often come with higher-than-average rents, it’s worth trying to negotiate a lower rate. Be prepared to compromise on other aspects of the lease agreement, such as the length of the lease or the amount of security deposit.
Make sure you’re comfortable with the terms. Triple net leases can be difficult to get out of, so make sure you’re comfortable with all the terms before signing anything.
But if you’re willing to do your research and have an experienced commercial broker with knowledge of the complexities of this type of investment, NNN investments can be a great way to earn passive income and build wealth over time. So, if you’re looking for an investment that offers potential appreciation and predictable income, NNN investment properties may be worth considering.
Like to find out more about NNN investment opportunities in the Lubbock, Amarillo, and West Texas area? Call David Powell or one of his associates with the Powell Group today.