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Home » Blog » What Are Landlord Costs with a Triple-Net Lease Property?

What Are Landlord Costs with a Triple-Net Lease Property?

Commercial vs Residential Real Estate

A triple-net lease (NNN) property is an investment with very few, if any, landlord costs or responsibilities associated with leasing the property. The creditworthy tenant agrees to a long-term lease that requires paying the “net” amount for three types of costs: net real estate taxes on the leased asset, net building insurance, and what’s defined in the lease as net common area maintenance (CAM) charges, which can also include operational expenses. So, what are the landlord costs associated with a triple-net property?

Business man holding money buy house business and laptop computer

NNN Landlord Costs & CAM

There are many different expenses related to a traditional leased property that need to be clearly defined in the lease terms and paid for by either the landlord or the tenant as outlined. However, in most NNN leases, the landlord does not pay any operational costs, common area maintenance (CAM) costs, or capital expenditures during the lease term.

With non-NNN lease properties, CAM can be the biggest grey area, but since the tenant benefits from the ongoing care of common areas and regular building maintenance for 10-20 years, in most leases, the tenant is expected to pay a prorated, or “pro rata,” share of those expenses. All CAM and additional operational costs that are the tenant’s responsibility will be outlined in the lease.

By contrast, when you purchase an absolute NNN lease property, CAM is not a landlord expense. It is all paid for by the tenant, which is common practice with corporations such as Walgreens and Dollar General.

Absolute NNN Lease Responsibilities

There are few, if any, landlord expenses when it comes to leasing a NNN property. However, as you contemplate your triple-net investment possibilities, watch for hidden landlord responsibilities that you may not know about or want in what may appear to be an attractive lease. If you choose an absolute NNN lease investment, then, as an “absolute NNN lease” investor, you do nothing but collect rent while the tenant takes care of everything.

Many national corporations that want brand uniformity, such as McDonald’s and 7-Eleven, choose to operate with a corporate-guaranteed NNN lease, which completely absolves the landlord of any financial or physical responsibility whatsoever. They willingly do their own maintenance, use their own vendors, pay for CAM and operating expenses over and above CAM, and pay for capital expenditures.

As the owner of an absolute NNN property, your multibillion-dollar tenant will be a reliable occupant providing a responsibility-free, expense-free, consistent monthly income for 10-20 years while you build your portfolio and reap the annual tax benefits.

Businessman with dollar sign .

Other Landlord Benefits of an Absolute NNN Lease

  • There is no day to day management.
  • The security of owning a physical asset in a prime location.
  • The worth of the underlying real estate itself.
  • Passive, guaranteed income from anywhere in the country.
  • A reliable, low-risk investment.
  • Preservation of wealth and stable investment diversification.
  • Annual tax benefits and the opportunity for a 1031 exchange.

To Wrap It Up – Absolute NNN = No Landlord Costs

While you continue to work your full-time job or as you settle into retirement and enjoy life, an absolute NNN lease investment is a great option for reliable, long-term income with few or no landlord costs or responsibilities. To find the perfect property for your financial and lifestyle objectives, engage a trusted, experienced buyer’s advisor from Westwood Net Lease Advisors.

Like no other firm in the United States, we focus on representing first-time and experienced buyers with every step of the buying process, from the property search through closing, at no charge to you. For more information, contact us today for a no-obligation, free consultation, 314-997-5227.

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Tags: 1031 exchange tax relief, Coronavirus Tax Relief Deadline, COVID-19 NNN