What is a Triple Net Lease (NNN)?
A triple net lease (NNN Lease) needed the tenant to pay part of or all of the expenses of the property maintenance which in normal circumstances would be paid by the owner of the property who is also known as the “Landlord”. The tenant generally pays fixed rent as well as all or some of the expenses. These expenses can cover maintenance, taxes, repairs, insurance, utilities and other items predetermined when lease agreement is signed.
These Triple Net Lease properties can be utilised for 1031 exchanges. The NNN market can be challenging to find available investment properties that fit your needs, especially for 1031 exchange investors that have limited time to replace, which is why it’s necessary to choose a Broker that is not only experienced but also in tune with today’s changing market.
Why choose DST over Triple Net Lease?
Many investors that have been interested in doing a 1031 exchange into a NNN property find the DST 1031 properties particularly attractive. The DST 1031 option has become an increasingly popular option for investors that were previously considering a NNN property.
Access to the same type of NNN leased real estate and tenants
Many 1031 investors realize that placing a large portion of their net worth into a single NNN property is just not prudent
Inflation protection potential
DST 1031 properties are “pre-packaged” for 1031 investors to be able to close on immediately
Triple Net Leases in detail
Some investors compare a triple net lease to a bond-like investment due to its stability, and because the returns are generally predictable for a longer period of time. While there is risk, when long term leases are agreed upon, re-leasing the building becomes less of a risk. In addition to this, investors can use tenants who have different credit profiles as those who have higher credit ratings are generally more favorable as tenants.
As with any investment, a triple net lease does have some risks which are minimal when high grade credit tenants lease the property and only a single tenants are involved. This generally results in a increased return and eases the concern of the re-leaseability of the property when tenants vacate.
A single-tenant triple net lease asset is calculated by a number of factors including the length of the lease, the increase of rent over the lease terms, the tenant’s credit, and the real estate itself.