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Understanding NNN Real Estate

by Arnold Gomez

Commercial real estate investors focus on cash flow. They are looking for sound real estate investments that provide steady and predictable cash flow. NNN commercial real estate for sale fits the bill. Here's why.

What Is NNN Commercial Real Estate?

Have you ever heard of NNN real estate but weren't quite sure what it meant? NNN stands for triple net, which refers to a special commercial lease agreement. In a triple net lease, the tenant is responsible for rent and all three of the property's operating expenses, including utilities, taxes, and maintenance.

Why Is NNN Commercial Real Estate Attractive to Investors?

For investors, an NNN lease is an attractive option for several reasons, including:

  • Cash flow. NNN provides predictable cash flow. The rent agreed to in the lease is the exact amount they get every single month. There is no need to subtract fluctuating items like utilities, taxes, or maintenance from their income. The tenant takes care of those costs.
  • Hands-off. NNN commercial real estate is very hands-off for the investor. They are not required to maintain the building or grounds in any way or make any repairs. There is nothing for them to actively manage.
  • Longer lease. Another advantage of investing in NNN real estate is that it offers longer lease terms than other types of leases, often multiple years, instead of a typical 12-month lease. That means there's less turnover, which can help keep costs down and improve the property's cash flow.

Why Is an NNN Commercial Lease Attractive to Tenants?

While there are many advantages to investing in NNN real estate, there are also benefits to tenants, including:

  • Lease terms. A triple net lease is often a multi-year contract with a fixed price for each of those years. In other words, your rental expense is fixed for the length of your lease and not subject to arbitrary annual increases, which helps you budget and manage your expenses.
  • Hands-off. Having a hands-off landlord is beneficial to a tenant as well. When you are a large business renting an entire building, you do not want to call and talk to a landlord or management company for every little thing. An on-staff maintenance person can take care of issues as they arise.

As with any investment, there are both risks and rewards associated with investing in commercial real estate. However, for investors, real estate with an existing NNN lease in place can be an attractive option worth considering. Before making any decisions, be sure to do your homework and consult with a financial advisor to ensure that an investment in NNN commercial real estate is right for you.