What is a NNN, or Triple Net, Lease Property?

A NNN Property is an income-producing property which provides rental revenue to the owner Net of all expenses. The tenant is obligated to pay all taxes, insurance, and building maintenance costs, as well as rent. Thus the annual income derived from the property is Net Net Net of all operating costs.
Characteristics: There are several key factors to consider when evaluating a NNN property. The most important is the lease term. While NNN lease terms range from 1 to 50 years or more, a prudent term is one that allows the purchaser to recoup most, if not all, of their acquisition costs through rental income. Since most leases contain pre-established rent escalations, higher rental income is obtained in the latter years of the lease. A reasonable holding period permits multiple rental escalations over the term of the lease. Many NNN leases are signed for 15-20 years and may have multiple 5-year renewal options. To protect the owner of NNN leases from tenant default, it is imperative that the leases include a corporate guarantee, making the corporation liable for rent throughout the term of the lease.

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