Why invest in a triple net lease?

Commercial real estate investing isn’t as complicated as sending a Tesla into orbit, but it nevertheless has its own nuances. One such nuance is the triple net lease.

We have a helpful FAQ page if you’re unfamiliar with the industry, or you can keep reading and we’ll cover the basics.

What is a triple net lease?

In a triple net lease (or NNN for short), the tenant pays rent plus the three “nets” – taxes, insurance, and maintenance.

This unique structure has numerous benefits. Tenants are often investment grade, such as Starbucks and Walgreens, and landlord responsibilities are substantially shifted to the tenant and away from the landlord.

Triple net leases aren’t the only game in town. There are other forms of net leases (i.e. single and double) out there. However, they don’t give investors the full basket of apples so to speak. Our focus is triple net, but we certainly work with all net lease iterations.

This sounds amazing. What’s the catch?

It’s tough to make predictions, especially about the future.” – Yogi Berra

Who knows if Yogi actually said that, but as with all of Yogi’s quotes, there’s some rich truth to be found.

Every investment involves risk. Net lease investing is no different. There’s risk. But this risk profile is precisely why investors are attracted to triple net leases.

They are often categorized as bond-like based on risk and rate of return. Investors should expect a lower return on investment as risk decreases, and an inverse correlation in the other direction as risk increases.

Are triple net leases completely passive?

We don’t think so. It is true that one attraction is passivity, but we don’t believe that sitting back and doing nothing is a great way to manage net lease investments. There are issues such as deferred maintenance and lease negotiation that require attention and may be best handled by a professional.

We think our asset management arm, Confidant Asset Management, is the best. But shameless plugs aside, investors should strongly consider having an asset manager on their side.

I’m new to the industry. What’s a good first step?

It is our strongly held view that you should have trusted professionals on your side. Reaching out to an expert is a good place to start.

We, of course, would be happy to have a conversation with you about your investment options. This “buyer side” work is one of our areas of expertise.