what is a triple net lease nnn 
a triple net lease triple net or nnn is a lease agreement on a property where the tenant promises to pay all expenses including real estate taxes building insurance and maintenance these expenses are in addition to the cost of rent and utilities nnns are one type of commercial property net lease a single net lease requires tenants to pay property taxes plus rent and a double net lease typically tacks on property insurance investopedia michela buttignolunderstanding triple net leases nnn in commercial real estate a net lease is a contract in which the tenant pays a portion or all of the taxes fees and maintenance costs a triple net lease requires that the tenant pay the building s property taxes building insurance and the cost of any maintenance or repairs over the lease term the rent in the triple net lease is generally lower than that charged in a standard lease agreement the capitalization rate cap rate is the expected rate of return on a commercial property the cap rate which is used to calculate the lease amount is often determined in part by the tenant s credit rating commercial property is real estate used for business activities or profit generating purposes it usually refers to buildings that house businesses but also refers to land used to generate a profit and large residential rental properties pros of triple net leasesfor tenants the tenant controls the maintenance upkeep and appearance of theproperty and has direct control over the costs they pay such as electricity or water they can also select the insurance carrier of their preference and can protest the taxes if necessary for landlords a triple net lease provides a steady and consistent revenue stream utility expenses repair costs taxes and property management are passed to the tenant cons of triple net leasesfor tenants the tenant assumes the risk of tax and insurance cost increases the landlord might overestimate the operating costs when determining the rental price which results in the tenant overpaying for some costs unexpected costs may arise during the time of occupancy for landlords finding good and reliable tenants willing to sign a triple net lease can be challenging downtime between tenants could result in no rental income while the building is vacant the tenant s financial strength and stability are key since they are responsible for operating expenses investing in triple net leasestriple net leased properties are a popular investment vehicle for investors seeking steady income with relatively low risk triple net lease investments typically include a portfolio of three or more high grade commercial properties fully leased by a single tenant with existing in place cash flow the commercial properties could include office buildings shopping malls industrial parks or free standing buildings operated by banks pharmacies or restaurant chains a typical lease term may last 10 to 15 years with rent escalation the benefits for investors include long term stable income with the possibility of capital appreciation of the underlying property investors can invest in high quality real estate without management concerns like vacancies improvement costs or leasing fees when the underlying properties are sold investors can roll their capital into another triple net lease investment without paying taxes through a 1031 tax deferred exchange 1investors in triple net lease investment offerings must be accredited with a net worth of at least 1 million excluding the value of their primary residence or 200 000 in income 300 000 for joint filers smaller investors may participate in triple net lease real estate by investing in real estate investment trusts reits that focus on such properties in their portfolios 2triple net lease example