Allen’s story on how he tackled day-to-day management responsibilities

Allen, an experienced real estate investor, has a whole story on how NNN investment changed his perception of real estate investment. Allen had a rental property in southern California that he had leased to a local tenant under a gross lease.  Everything was working fine for him in the beginning. He was receiving rent on that property every month. However, as the property started aging, Allen would have to invest a lot of his time and earning in maintaining it.

Burdened with day-to-day management responsibilities, Allen chose to relinquish his rental property. He reinvested the proceeds in another rental property using a 1031 exchange. Though he managed to defer capital gains tax, he was worried if he would again be burdened with management responsibilities. On receiving a few suggestions from senior experts, he leased his new property under a NNN lease. It turned out to be a life-changing decision for him, as within no time he got relief from tiring day-to-day management responsibilities.

What is a NNN lease?

A NNN or triple net lease is a single-tenant arrangement under which the tenant is responsible for covering all operating expenses associated with the property they’ve rented. Unlike a gross where the tenant just pays a flat rent, NNN tenants pay all operating expenses along with the base rent setting investors free from management responsibilities. As the majority of NNN tenants are big established companies, the risk of default is also significantly low in NNN investment. This kind of lease agreement requires long term commitment and may lock the tenant for 10-15 years.

Different types of Net Leases –

NNN lease isn’t the only of its kind. You may find variations in net leases depending upon what kind of expenses the tenant agrees to cover under the agreement.

• Absolute NNN Lease – This kind of lease agreement requires the tenant to pay all three major operating expenses including property taxes, insurance fee, and maintenance expense (together known as the three nets).
• Double Net Lease – A double net or NN lease requires the tenant to pay two operating expenses along with the base rent. Usually, under this kind of agreement, the tenant pays the insurance fee and property taxes, whereas the investor looks after the maintenance expenditure.
• Single Net Lease – As the name suggests, a single net lease requires the tenant to pay one operating expense along with the base rent. Under this kind of agreement, the tenant could either pay the insurance fee or property taxes. Whereas, the maintenance expenditure associated with the property becomes the investor’s responsibility.

Should you go for NNN investment or not?

This brings us to our main concern, should you switch to NNN investment? Of course, you should. There is no reason why you shouldn’t invest in NNN properties. Relief from management responsibilities, tax advantages, and increased cash flow are some of the top benefits of investing in NNN properties. Not to mention, the benefits of NNN investment multiply when mixed with a 1031 exchange.

To know more about how NNN investment works, you can reach out to our impaneled experts on 888-993-2835 or email us at info@triplenetlease.com