Triple Net Lease (NNN) Property

A triple net lease, generally abbreviated NNN, is a commercial lease structure in which the tenant generally pays property taxes, building insurance, and maintenance costs in addition to base rent, leaving the landlord with a comparatively predictable income stream and reduced day to day management responsibility. Triple net lease properties generally include free standing retail buildings occupied by a single tenant, such as a pharmacy, quick service restaurant, or convenience store, as well as some industrial and office buildings leased to a single corporate tenant on a long term basis. Because the tenant generally absorbs most of the variable operating costs, triple net lease properties are frequently sought after by Columbus, OH investors who want to reduce hands on management, particularly those exchanging out of a more management intensive property type such as a multifamily building.

Triple net lease property generally qualifies as like kind real property for a one thousand thirty one exchange when it is held for investment or business use, making it a common replacement property choice for investors completing an exchange. Underwriting a triple net lease property generally involves evaluating the tenant's creditworthiness, since the reliability of rent payments depends heavily on the tenant's financial strength, along with reviewing the remaining lease term, any rent escalation clauses, and the specific responsibilities allocated between landlord and tenant in the lease. Columbus, OH investors evaluating a triple net lease replacement property generally also consider location fundamentals, since even a strong tenant lease provides less protection if the underlying real estate would be difficult to re-lease or sell after the current lease term expires.