Triple Net Real Estate Lease- How It Favors Landlord and Tenant?

In general, there are two types of leases prevalent in commercial properties: Gross lease and Net Lease. In Gross Lease, the landlord charges tenant rent for a month and uses that amount to pay operating expenses. To compensate for the risk, rates are usually kept higher. Whereas in Net Lease, the owner charges base monthly rent, and the tenant pays operating expenses separately. A triple net real estate lease is a commercial agreement where the tenant pays the landlord’s taxes, the net amount of insurance, and maintenance expenses. There are many variations in the lease agreement; hence a tenant needs to pay close attention.

Benefits for the landlord:

• Long-term lease agreement- A typical triple net real estate lease ranges from three to five years. Landlord gets secured payment for upcoming years. Thus, the owner doesn’t have to worry about vacancy and turnover for years. However, the NNN lease may not exceed 25 years or more.
• Consistency- NNN lease is structured with a fixed increase in rent to account for inflation done annually. This means an owner can expect profit growth every year. Especially when the lease term is long, the rise can give significant perks. Also, the rent and profit are strictly consistent every year.
• Shared leases- In the case of triple net real estate, leases are generally transferable. Therefore, the owner can sell their property whenever possible, even when the lease is in place or the property is occupied. This point is crucial for many landlords as they can strategize their investment plans without worrying about the tenants in the property.

• Minimum responsibility- Most of the operating expenses are considered as tenant responsibility and are given by them. Landlords have minimal obligations here. A triple net real estate lease requires tenants to pay taxes, construction costs, and property insurance to make property values for a particular business. Landlords have no stress of paying the expenses.
• Multiple bidders- The estate market is full of potential investors who seek an excellent place to live and invest their money. Triple net real estate offers them the opportunity to bid for multiple locations with solid features and the most extended lease. Hence landlords get more options in hand to choose the right tenant for their property.

Perks for the tenant:

• Low base price on lease- Getting a less amount of base lease is obviously an excellent benefit for tenants. Triple net real estate allows you to enjoy a lower monthly rate than another type of lease as you will be spending a certain amount on taxes, insurance, and maintenance expenses. However, you will definitely be saving more money in NNN lease than others.
• Leverage of negotiations- You can use some excellent aspects of the NNN lease agreement to get some extra leverages. One of the them is negotiating. You can use your credit score or reputation to lower the base rent and turn the lease work in your favor. Landlords usually trust a tenant with a solid track record and let him have the base rent he desires.
• Location- Triple net real estate properties offer accessible and prime locations for the business environment. NNN estate is highly popular with investors, and hence such properties are closer to popular businesses. As a result, a tenant can gain better traffic and exposer through them.

Final Thoughts

While evaluating options for commercial real estate Atlanta, investors choose triple net real estate the most. Although NNN lease involves some risky elements, considering the high-value benefits, these small risks can certainly be avoided. People prefer NNN lease properties like office buildings, shopping malls, and industrial parks. Investors get quality properties with modified rent agreements in the same area. Keeping in mind all the factors, landlords and tenants focus more on triple net leases as compared to others. Consult a property consultant to analyze further information. Before making a decision, weigh the pros and cons that you may suffer in the future!