Net leases are a crucial part of any real estate investment. If you have worked with Millcreek Commercial before or have done research on commercial real estate investments, then you have most likely heard the term “triple net lease”. We pride ourselves on having fully managed and hands-off investment properties that cultivate passive income for our investors. However, triple net lease is not the only type of net lease out there. It is important to understand the difference when considering investing in a real estate property.
Types of Net Leases
- The first type of net lease is single net lease. This lease can also be referred to as just “net lease” or N lease, and is not as common for rental and investment spaces. The tenant pays the property taxes, and the other expenses are paid by the landlord—which can include insurance, maintenance and repairs, and utilities.
- The second type, double net lease, is also known as “NN” lease or net net lease. Double net leases are much more popular in commercial real estate than single net. In these leases, the tenant pays property taxes and insurance premiums in addition to the rent. All of the maintenance costs are still the responsibility of the landlord.
- The third type is triple net lease, or “NNN”. Triple net leases relieve the landlord of the most risk in comparison to the other two net lease types. In a triple net lease, all maintenance costs, repairs, and expenses associated with the property are covered by the tenant. In some cases, the landlord may pay for the expenses of the property up-front on behalf of the tenant, but by calendar or fiscal year-end, the tenant provides full reimbursement for those expenses to the landlord.
- The fourth and last type of net lease is absolute triple net (our favorite). An absolute triple net is where all expenses, insurance, and maintenance is paid by the tenant, with absolutely no tenant responsibility whatsoever. This type of net lease is extremely attractive to investors due to its highly passive structure and strong income stream.
There are two very good reasons to invest in a triple net lease:
- You get the rewards without the risk
- You don’t have to sweat the small stuff
NNN leases are considered to be one of the most secure commercial real estate investments out there. Our tenants are backed by a corporate guarantee, making them low-risk and financially stable. Triple net leases are attractive because they are free from the managerial obligations that typically come with owning a property. The burden of the Triple T Monster: tenants, trash, and toilets, is lifted from the shoulders of the investor, and instead is placed on the tenant. You can have the passive income you’ve been looking for without having to lift a finger to get it.
It is crucial to understand the differences between net leases so you can make informed decisions when it comes to an investment property. If you are looking for a passive, hands-off experience, an absolute triple net lease is the way to go! Contact us today if you are in the market for a safe, secure, and stable commercial real estate investment.