Why a NNN Lease?

A NNN lease typically means that the tenant, not the landlord, is responsible for paying all operating expenses and maintaining the property. This includes property taxes, insurance, and common area maintenance (CAM), however may not include items such as HVAC systems and roofs. Additionally, an absolute NNN lease entails the landlord collecting the rent checks from the tenant per the rent schedule and not having any expenses except for optional cost of a master insurance plan or CPA, for example. Having a NNN lease in place makes the property more attractive for an investor and helps the buyer focus on the terms needed to make a viable investment instead of narrowing down properties within close proximity. The downside to a NNN lease is the cap rate is usually lower, which means your return on investment is less. The lease term also affects the cap rate with longer terms (10+ years) pushing the cap rate down and shorter terms giving a higher return on investment. So, why a NNN lease? Because it’s easy to just sit back and collect mailbox money.

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