Investors can benefit from NNN lease properties in a variety of ways. In NNN leases tenants take on the responsibility of major expenses such as HVAC and roof repairs keeping the operation cost lower for the landlord. Typically, NNN leases have lower rent per square foot rates which increases the tenant pool when a landlord is ready to lease the property. For specific tenants, landlords will frequently modify leases allowing for greater flexibility and higher tenant retention.
Absolute net lease
Most investors in today’s net lease market prefer an investment that is truly passive, therefore, an absolute net lease is a requirement for many of these investors. Investors prefer to hold these assets long-term, which means there is likely some wear and tear maintenance, as well as a roof that will need to be replaced at some point. With an absolute net lease in, the risk of expenses associated with building maintenance shifts solely to the tenant, allowing the landlord to receive a 100% passive investment.
NNN 1031 exchange
In its simplest form, a 1031 exchange is a tax deferral strategy for real estate transactions in which a property owner or investor sells one property and purchases another within a specific time frame. The transaction does have to qualify as a “like kind” exchange.
Often a NNN lease will offer a lower monthly rent than a gross lease since the tenant will be responsible for maintaining the building. In a NNN lease tenants are responsible for maintenance and repairs, therefore cost savings for expenses related to operating the building are passed on to the tenant instead of the landlord.