Triple Net Lease

There’s a lot that goes into being a property owner. Some of it’s fun, like being able to paint a room plaid, and no one can tell us not to. And some of it’s not so fun, like discovering that property ownership is a lot more expensive than just paying a mortgage. If we had to divvy up our ownership expenses into five categories, they’d be: mortgage, insurance, maintenance, taxes, and utilities. There’s a lot of expense in there. This is true for homeowners and it’s true for commercial property owners as well.

But if we’re a commercial landlord, we can set up our rental leases to help us recover some of those expenses. One option is something called a “triple net lease,” which is where our tenant is not only responsible for paying us rent, but also paying for the property taxes (that’s the first net), property insurance (there’s net #2), and maintenance (the third and final net) for their share of the property. This is a good deal for us because it gives us a nice, predictable income, and hedges the costs of major repairs a little bit, and it’s a good deal for the tenant, because triple-net leases (also called NNN leases, btw) are usually longer-term than standard leases, and sometimes end up costing the tenant less in the long-run.