Want to get rid of management responsibilities? Switch to NNN Investment
Losing a part of your income in maintaining your investment property may not be a pleasing experience. However, this is how the real estate market works. Landlords or property owners are the ones responsible for maintaining their property. You can’t expect your tenant to pay all operating expenses associated with the property that you’ve given on a gross lease. However, it can be possible if you switch to a NNN lease investment.
What does NNN stand for?
NNN stands for Net, Net, Net. A triple net or NNN lease is a single-tenant agreement under which the tenant covers all operating expenses associated with the property they have rented. Which means, you as a landlord will be free from management responsibilities. Under a NNN lease, the tenant is responsible for covering three additional expenses along with the base rent. The three operating expenses include property taxes, insurance fee, and maintenance cost.
NNN Investment is beneficial for both tenants and property owners
It would be wrong to say that NNN investment only benefits property owners. Tenants also get their share of profit. While property owners don’t need to invest a part of their income on operating expenses, tenants enjoy relaxation in the rent as they pay less under a NNN lease than what they would be paying under a gross lease. As all the operating expenses are paid by the tenant, they have complete control over the property. In case the property requires any kind of repair, they can complete it without asking the property owner.
Variation in Net Leases
Not every net lease requires the tenant to pay all operating expenses associated with the rented property. Some net leases require tenants to pay one or two operating expenses and not all. Under an absolute NNN lease, the tenant is required to pay all three operating expenses. On the other hand, a double net or NN lease requires them to pay two operating expenses along with the base rent. Under this kind of lease agreement, the tenant pays the property taxes and insurance fee along with the base rent. Whereas, the property owner is responsible for paying the maintenance cost. Similarly, a single net lease requires the tenant to pay one operating expense which could either be property taxes or the insurance fee. Whereas, the property owner pays the other two expenses.
How you can invest in NNN properties?
There are two ways. One is direct investment, other is 1031 exchange. If you just want to diversify your investment portfolio by adding properties of different grades, you can directly invest in NNN properties. However, if you want to sell one of your properties first and then use the proceeds to buy a NNN property, you should do a 1031 exchange. As you may know, a 1031 exchange allows investors to defer capital gains tax on exchanging an investment property for another like-kind property. Therefore, you can sell any of your investment property and then reinvest the proceeds into a NNN property. This way, not only you’ll have a new property in your portfolio but you will also be able to defer taxes on your capital gains.
To speak to a NNN advisor, you can call 888-993-2835 or email us at firstname.lastname@example.org