Triple Net Lease Pros And Cons
The triple net lease or shortly known as NNN is one of the most attractive for investors and landlords, but it also has its fair share of cons.
Minimal landlord experience- The three “nets” in a triple net lease are easy on landlords, as they tend to provide the benefit of maintenance, property taxes, and building insurance, which get passed through to the tenants. Each tenant will be liable for paying their share of expenses in the property management. landlords will have minimal responsibility when it comes to expenses and maintenance of the property.
Long Term Occupancy- Especially in single-tenant deals with national or regional credit, the renters will come for the long term for the benefit. It is common to find properties with 10, 15, or 20 years of the lease. Moreover, long-term occupancy ensures the fixed partial income from the asset the landlord has.
Limited upside potential- There is less chance of increasing the income potential and value of the property. As people come for long time leases, it is not possible to change the rent contact in between the tenancy period. To change the rate of the rent, you do have to wait for the tenant to move from the property. For the investors that are looking to place capital in secure investments and benefit from passive income, this limitation for greater upside isn’t a big deal.
Turnover risks- There is a risk of difficulty re-lease. As the property was customized to accommodate a particular type of renter, it is a possibility that other renters might not prefer the space for them.