With a global financial market that is known to be volatile at times, investors are often looking for a stable and predictable place to put their money. Similar to buying a bond, investing in triple net lease properties is one of the smartest and most reliable investment tools available today.
While we know this is a great opportunity for many investors, it can be confusing to those unfamiliar with commercial real estate or 1031 exchanges. Let our experts walk you through the basics of buying and selling net lease properties.
A net lease is a type of commercial real estate lease in which the tenant (lessee) is required to pay for some or all of the property expenses that normally would be paid for the property owner (landlord or lessor), in addition to rent. Because of this, the property owner receives a rent “net” after the tenant pays required expenses. The expenses associated with operating and maintaining the property may include taxes, utilities, insurance, maintenance, repairs, sewer, water, etc. The exact items that the tenant must pay are typically specified within the lease.
A property owner may use a net lease in order to avoid the burden of managing taxes, fees, and insurance, since the tenant would be responsible for some or all of these items. As a result, rent may be lower than a traditional gross lease. The tenant is required to pay taxes and fees regardless of their business’ performance; therefore, there is added risk for a tenant. Because of this, net leases typically favor the property owner (lessor).