What are Triple-Net (NNN) Properties?

Triple net properties, also widely known as NNN properties or NNN deals, can best be described as single tenant commercial properties that are only leased to potential tenants who have high credit scores and ratings.  Many would call them sucker tenants because they are solely responsible for real estate taxes, insurance and any maintenance on the rental space.  While this may afford the tenant a pseudo sense of freedom, they are still leasing the property from an owner and putting more money into it then they are getting out of it. 

What are Triple-Net NNN Properties?

These triple net properties are a virtual gold mine for commercial real estate owners because on the surface it appears that all they have to do is collect leasing fees from credit worthy tenants.  It is steady, guaranteed income across the board for the investor who feels that they cannot lose.

The reality is that looks can be deceiving especially when it comes to a triple net property for several reasons: 

• For one thing, the property is not completely risk-free as it appears on to be on the surface.  In the whimsical world of real estate, the risk is almost always present. 
• True credit worthiness may be overlooked, and once it is intrinsically evaluated, the property owner may come to find that as the tenant’s credit rating and credit worthiness declines, property value declines as well.  It is an illustration of the premier rule of real estate: there is always a risk.
• If you lease to a commercial tenant who does not have a long term track record of success, it will have a detrimental effect on you as the investor and owner.  Someone once said that everyone is connected... this has never been more true than in the field of real estate.  Once your lease your space to commercial companies, they are temporarily tied to you as the investor and the owner.  What do you think will happen if the company that you lease to comes in at below investment grade at the end of the fiscal year?  Other companies may link the failure of that company to you as the investor.  This is the odd dichotomy of it all.

Getting Help

Triple Net deals still follow the sample real estate rules as any other real estate deal.  Everything else is standard aside from how the lease is handled.  If you are interested in gaining a triple net deal then you should contact your local real estate broker to further flush out the details. You should also speak with an experienced commercial real estate attorney who can better explain both the concept behind NNN properties as well as the risks and rewards.