Triple Net Properties: Passive Income Real Estate Investment
A triple net lease pertains to a type of leasing agreement that is designating the lesser as the one solely responsible to pay all related costs of the asset being leased which is additional to the rental fee applied under the lease. The expenses include insurance, property taxes, repair, maintenance, utilities, operations, and other items. Triple net lease is also referred to as net-net-net (NNN) lease which pertains to net real estate taxes, net common area maintenance, and net building insurance. The standard names in the commercial real estate industry on the various sets of costs which are passed on to the tenant include single net lease, double net lease, triple net lease, bondable lease, and ground lease.
There is an increasing popularity of triple net leased properties most especially for investors who are searching for a steady income with a relatively lower risks as compared to other forms of investments. When it comes to triple net lease investments, they are generally offered as a portfolio of real estate properties consist of three or more high-grade commercial properties, wherein a single tenant lease it with an existing in-place cash flow. Shopping centers, office buildings, industrial parks or free-standing buildings operated by restaurant chains or banks are the commercial properties under the triple net lease, with a typical lease term agreement of ten to fifteen years in a built-in contractual rent escalation. Triple net investments help investors gain long-term and stable income with capital appreciation of the property. The management is free from management responsibilities, a long-term lease to a qualified tenant, attractive financing, stable cash flow, and unique tax benefits which only real estate provides. Triple net investments appeal to part-time investors who are looking for guaranteed income without management responsibilities, and it serve an attractive exit strategy for those with portfolios that are mature.
As with any other forms of investment, you know as an investor that there are associated risks, so you need to consider important things when structuring and valuing the deal. it is crucial to assess the quality or health of your tenant’s business, making sure that the tenant is capable of sustaining his business, with financial strength and capability. In terms of tenant evaluation, it is important to consider the number of stores, operating margins, debt to equity ratios, outlook of the sector of their industry and stability of management. In a triple net investment, you are actually providing a capital to your tenant’s business, and the success has a direct bearing on the long-term success of your triple net investment. You may contact us by checking our details in our website’s homepage if you are looking for triple net investment.