BiggerPockets

Triple Net Lease Commercial Property

TRIPLE NET LEASED COMMERCIAL PROPERTY

Exchange Into Management-Free And Headache-Free Ownership: Are your real estate investments giving you a management headache? Are you tired of tenant complaints and property destruction? As a real estate investor, are your goals security, predictable partially tax-sheltered income with an inflation hedge, if so, then commercial triple-net lease property is an excellent vehicle to create wealth through real estate.

This real estate investment product requires little or no management, has little risk, and produces monthly income from lease payments. The lease agreement can also provide the opportunity for rent increases as a hedge against inflation.

What Is A Triple-Net Lease Property? Over the past several years, owning commercial property under a triple-net lease arrangement has emerged as a highly popular and effective strategy in real estate investing. A triple-net lease property is an investment where one owns real estate (land and building). Leases to a tenant for a 15-25 year term, who agrees to occupy the property, operate their business on the premises, pay rent and all the property operating expenses (taxes, maintenance, and insurance) with the opportunity for rent to increase over time as a hedge against inflation.

How Does This Differ From Owning Other Investment Property? Unlike owning duplexes, apartments, land, or an office building, owning a commercial property under a triple-net lease agreement to a business tenant is a passive investment (management and headache-free). In most real estate investments such as mini-storage facilities, apartments, and office buildings you as the property owner must perform property management duties, and pay operating expenses. You rent the property, collect the rents, refurbish the premises, pay the property taxes, insurance premiums, maintenance, accounting, legal, and other operating expenses. Whereas, under a triple-net lease arrangement the tenant agrees to perform all these functions for you as the owner of the property in return for a long-term lease agreement.

With a passive real estate investment, such as owning commercial property under a triple-net lease arrangement, the tenant operates its business in the location. As the owner of the property, you do not have to contend with monthly renters and operating expenses. This type of real estate investment is passive, similar to owning stock in Sears, you receive the dividends or, in this case, lease payments. Further, these types of commercial tenants are positive business renters. Unlike apartment renters who tend to abuse the property and then move out leaving the owner to refurbish and find new renters, commercial tenants have a vested business interest in seeing that a location is well maintained and attractive to customers. As a result, there is an economic incentive to enhance the owner's property over time.

Comments

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  Charles Perkins — about 2 years ago

  I worked for a property management company that had triple net strip malls. I have been considering something like this where I can also have my own office.