The term triple net (NNN) simply means net of taxes, net of maintenance, and net of insurance. A triple net investment is a freestanding retail building that is leased by a tenant responsible for paying rent, taxes, insurance premiums, repairs, and utilities. The tenant is also committed to a long-term lease, typically from 10 to 25 years.
BENEFITS OF INVESTING IN NNN PROPERTIES?
NNN properties can be considered as bond-like investments due to their stable, predictable, and often higher returns. NNN tenants commit to long-term leases, thereby reducing the risk of re-leasing. Choosing tenants with different credit profiles can tailor NNN investments to an investor’s risk-reward expectations
RISKS RELATED TO INVESTING IN NNN PROPERTIES?
While there are typically few risks associated with investing in NNN properties, investors should be cognizant of the risk that non-investment grade credit tenant profiles present. Although this provides a high risk, high reward opportunity, many investors favor corporate backed leases as a means of maintaining investment security. In the unlikely event that a tenant decides to vacate the premises prior to the lease expiration they are still held responsible for paying rent for the remainder of the lease.
HOW ARE NNN ASSETS VALUED?
Unlike traditional real estate investments, whose value is determined exclusively by the real estate itself, a NNN property’s value is determined by the tenant’s credit, the length of the lease, rental escalations over the term, and last but not least, the real estate.
BEST TIME TO INVEST IN A NNN PROPERTY?
NNN properties are sound investments in good and bad economic times and in hot and cold real estate markets. Here’s why: a single-tenant net-lease is guaranteed by a long-term lease at a preset rental rate. As an owner, you will know exactly who your tenant will be, how long that tenant will be there, and how much rent they will be paying. This means you will derive a steady income from your investment, regardless of how the economy or real estate market is performing.