Triple Net: The Ultimate Passive Real Estate Investment

One of the reasons why people find commercial real estate so appealing is its diversity. In addition to geographic and product type diversity, there are also different lease structures to consider: gross leases, single net leases, double net, and triple net leases are just a sampling of the various lease types.


Triple net (NNN) leases are certainly one of the best leases for those looking to earn passive income. NNN leases can be traced back to the evolution of commercial real estate leasing practices in the United States, particularly in the 20th century. NNN leases were developed as a response to the changing needs and preferences of both landlords and tenants.


In the early days of commercial leasing, landlords typically maintained full control over their properties, including the responsibility for property taxes, insurance, and maintenance. In turn, tenants pay a flat rent. Over time, however, landlords and tenants began to seek lease arrangements that offered more flexibility and tailored solutions to their specific needs. The concept of “net leases” thus emerged.


This article explores everything you need to know about triple net commercial leases.

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What is a triple net lease?

A triple net (NNN) lease is a type of commercial real estate lease in which the tenant bears the responsibility for paying not only the base rent, but also the property’s operating and maintenance expenses. The term “triple net” refers to the three “buckets” of expenses for which the tenant is responsible:

  1. Property Taxes:

    In a NNN lease, the tenant pays their pro rata share of the property taxes. This may be the entire property bill, or it may be shared depending on whether the building is leased to a single tenant or multiple tenants. The local municipality determines the tax amount to be paid based on the value of the property.


  2. Property Insurance:

    The tenant is responsible for obtaining and paying for property insurance, which generally includes liability insurance and property insurance that protects against damage or loss.


  3. Property Maintenance:

    NNN leases are unique in that they obligate the tenant to cover the costs of repairing and maintaining the property. This includes routine maintenance, repairs, and any necessary upkeep to ensure the property remains in good condition. Some leases will be structured in a way that requires the tenant to maintain the building “walls-in” with the owner responsible for “walls-out”. The lease will typically determine exactly who is responsible for what building and grounds maintenance.


As noted above, in a NNN lease, the tenant pays the three net expenses mentioned above. As a result, the tenant’s monthly rent payment includes base rent plus their share of these operating expenses.

The value of triple net leases

The primary value proposition to owning NNN properties is that it allows investors to take a hands-off approach to building operations and maintenance. Because the leases are structured so that the tenant must take on property oversight and routine maintenance, the owner can avail him- or herself from the day-to-day tasks that sometimes overwhelm individual investors. 

Moreover, NNN leases are typically associated with credit-worthy tenants who are willing to sign long-term leases. This provides reliable, consistent cash flow for NNN owners.

Good candidates for triple net leases

NNN leases are widely used in commercial real estate, especially for properties leased to large national retailers, fast-food chains, pharmacies, and other established businesses. Below is the profile of what’s considered a “good” candidate for triple net leases: 

  • Creditworthiness:

    A good NNN tenant typically has strong financials and a solid credit rating. They should demonstrate a history of consistent revenue generation, profitability, and a strong balance sheet.


  • National or Established Brand:

    NNN tenants with a national or well-established brand often offer a higher level of stability and property recognition. These tenants tend to have a proven business model, wider customer base, and stronger market presence. Recognizable brands can attract customers and enhance the property’s long-term desirability.


  • Operational Track Record:

    Good NNN tenants will have a strong operational track record. A history of successful operations demonstrates competence, management capabilities, and the ability to adapt to market conditions.


  • Long-Term Lease Commitment:

    Most NNN leases are at least 5 to 10 years long; some will be as high as 20 years (think Wal-Mart, Home Depot, etc.). A good NNN tenant is one that feels confident enough in their business model and market reach that they are willing to sign a 10+ year long lease. 


Of course, it is important for any prospective investor to conduct thorough due diligence on prospective tenants, including reviewing their financial statements, credit reports, lease history, and market research. 

Ideal locations for triple net leases

NNN investors will want to spend some time evaluating different property locations. Here are some of the factors to consider when identifying good locations for NNN properties:


  • Population and Demographics:

    Look for locations with a stable of growing population base, as this indicates potential customer demand for the tenant’s good or services. Analyze demographic data such as population size, age distribution, income levels, and employment rates to ensure alignment with the tenant’s target market.


  • Economic Stability and Growth:

    Seek locations with a robust and diverse economy. Look for regions or cities with steady economic growth, low unemployment rates, and a favorable business environment. Areas with multiple industries, established businesses, and a track record of attracting investment are generally considered desirable.


  • Access and Visibility:

    Consider NNN locations with good accessibility and visibility. Properties situated near major highways, busy intersections, or other major transportation hubs can enhance tenant visibility and attract more customers. Easy access to public transportation and ample parking are also advantageous.   


  • Market Demand:

    Evaluate the market demand for the tenant’s product or service in the specific location. Consider factors such as market saturation, competition, and consumer preferences. Research local market trends, demand drivers, and the potential for future growth to ensure the tenant will thrive in that market.


  • Infrastructure and Amenities:

    Assess the quality of infrastructure and amenities in the area. Look for locations with well-developed infrastructure, including reliable utilities, internet connectivity, and transporation networks. Nearby amenities such as shopping centers, restaurants, schools, and healthcare facilities can contribute to the property’s attractiveness.


  • Zoning and Regulatory Considerations:

    Review local zoning regulations and land-use policies to ensure the property aligns with permitted uses and future development plans. Familiarize yourself with any specific regulations or restrictions that may impact the property’s operations, potential for expansion, or future resale value.


  • Real Estate Market Conditions:

    Analyze the local real estate market conditions, including supply and demand dynamics, vacancy rates, rental growth, and property values. A stable or growing real estate market can provide favorable conditions for investing in NNN properties, potentially leading to appreciation and liquidity.


  • Tenant-Specific Factors:

    Consider tenant-specific factors when evaluating location suitability. Some tenants may have specific requirements or preferences, such as proximity to specific demographics or co-tenancy needs. Try to align the location with the tenant’s business strategy and target market. 


It is important to conduct thorough market research, consult with local real estate professionals, and assess the specific investment goals and tenant requirements when determining the ideal location for NNN properties. 

With a triple net lease (NNN)

How to find triple net investments

There are several ways to find NNN (Tripe Net) properties for sale. Here are some common methods and resources to consider:

  • Online Commercial Real Estate Listings:

    Commercial real estate listing platforms, like LoopNet, CoStar, and Crexi, often have dedicated sections to search for NNN properties. These platforms allow you to search and filter properties based on location, property type, price range, and other criteria.



  • Real Estate Brokers and Agents:

    Commercial real estate brokers and agents will often specialize in a specific product type, such as NNN properties. Reach out to a specialist to find available listings in your target area. They not only have access to online market databases, but will often be able to utilize their industry connections to help source off-market deals.



  • National NNN Property Listing Services:

    Some specialized listing services focus specifically on NNN properties. Examples include NNNDealFinder, NNNPro, and These platforms provide comprehensive databases of NNN properties across the country and may offer additional resources and assistance with deal analysis.



  • Real Estate Investment Marketplaces (Crowdfunding):

    Online marketplaces like CrowdStreet and RealtyMogul provide access to private investment opportunities, including NNN properties. These platforms enable investors to participate in syndicated deals and gain exposure to a variety of NNN properties. 

Calculating a triple net lease

Calculating a NNN (Triple Net) lease involves determining the total rent payment and understanding the expenses for which the tenant is responsible. Here is a step-by-step guide to calculating a NNN lease.

  1. Determine the Base Rent:

    The base rent is the initial rent amount specified in the lease agreement. It is typically a fixed amount or a percentage of the property’s value. This base rent is the starting point for calculating the total rent payment.


  2. Identify Operating Expenses:

    Review the lease agreement to identify the specific operating expenses that the tenant is responsible for. Common expenses include property taxes, insurance premiums, and maintenance costs. Make sure to understand how these expenses are calculated and if there are any caps or exclusions.


  3. Obtain Expense Estimates:

    Obtain estimates or historical data for the operating expenses from the property owner or property management company. This will help you determine the approximate cost of each expense component.


  4. Calculate the Tenant’s Share of Expenses:

    Determine the tenant's share of each operating expense based on the lease agreement. Expenses are typically allocated based on the tenant's proportionate share of the total leasable square footage in multi-tenant properties or as a fixed percentage of the property's total expenses in single-tenant properties.


  5. Calculate the Total Rent Payment:

    Add the base rent to the tenant's share of the operating expenses to calculate the total rent payment. The formula for calculating the total rent payment in a NNN lease is:

    Total NNN Rent Payment = Base Rent + Tenant’s Share of Operating Expenses


  6. Consider Rent Escalations:

    Determine if the lease includes any rent escalations over time. Rent escalations can be based on factors such as inflation, fixed annual increases, or market conditions. Adjust the base rent accordingly for each escalation period to calculate the total rent payment over the term of the lease. 


It’s important to note that NNN leases can have various complexities, and the specific calculations may differ based on the terms of the lease agreement. It’s advisable to review the lease carefully and consult with professionals such as real estate agents, property managers, or accounting with experience in NNN leases to ensure accurate calculations and understanding of the financial obligations involved.

Beneficial qualities in a lease advisor

A Triple Net (NNN) lease advisor is a professional who specializes in assisting investors, landlords, and tenants in navigating the complexities of NNN lease transactions. These advisors provide expertise and guidance throughout the lease process, offering valuable insights and services to ensure optimal outcomes for all parties involved. Here's an overview of the role and responsibilities of a NNN lease advisor:


  1. Market Analysis:

    NNN lease advisors conduct thorough market analysis to identify suitable properties and potential tenants based on specific investment objectives. They evaluate market conditions, property values, rental rates, and tenant creditworthiness to guide clients in making informed decisions.


  2. Tenant Sourcing:

    Advisors assist landlords in identifying and sourcing potential tenants for their NNN properties. They leverage their networks, market knowledge, and industry contacts to connect landlords with reputable and creditworthy tenants that align with their investment goals.


  3. Lease Negotiations:

    NNN lease advisors play a crucial role in lease negotiations. They help landlords and tenants navigate the negotiation process, ensuring that lease terms are favorable and mutually beneficial. Advisors work to secure competitive rental rates, favorable lease terms, and appropriate allocations of expenses and responsibilities.


  4. Due Diligence:

    Advisors conduct thorough due diligence on behalf of their clients. They review lease agreements, financial statements, tenant credit reports, property inspection reports, and other relevant documents to ensure the accuracy and legitimacy of the transaction. Advisors assess the risks and opportunities associated with the property and tenant to provide comprehensive recommendations.


  5. Financial Analysis:

    NNN lease advisors perform financial analysis to assess the financial viability and potential returns of NNN lease investments. They calculate net operating income (NOI), evaluate cash flow projections, and analyze return on investment (ROI) metrics to help clients make informed decisions.

  6. Market Trends and Insights:

    Advisors stay updated on market trends, industry regulations, and other factors that may impact NNN lease investments. They provide clients with insights and recommendations based on their knowledge of market conditions, emerging opportunities, and potential risks.

  7. Portfolio Management:

    NNN lease advisors assist clients in managing their NNN lease portfolios. They provide ongoing support, monitor lease compliance, assess market conditions, and offer guidance on lease renewals, lease terminations, or property dispositions. Advisors help clients optimize their portfolios for long-term success.


NNN lease advisors aim to provide clients with comprehensive support, expertise, and personalized guidance throughout the NNN lease transaction process. Their goal is to help clients maximize returns, mitigate risks, and achieve their investment objectives in the NNN lease market.  


Those who decide to invest in NNN properties will often find them to be a highly attractive way to generate passive income. However, the decision to invest in NNN properties should ultimately be based on a careful analysis of your individual circumstances and investment objectives. Weigh the potential benefits and risks in the context of your broader investment portfolio. When in doubt, consult a third-party advisor for guidance.

Are you ready to start investing in NNN properties? Contact us today to learn more.