Net Lease•7 min read•September 15, 2023
Triple Net Lease Investing: Fundamentals
Understanding NNN lease structures and how to evaluate single-tenant net lease investments.
Triple net (NNN) leases transfer operating expenses to tenants, creating predictable income streams for landlords. Understanding lease structures is essential to accurate valuation.
NNN Lease Components
- Tenant responsible for taxes, insurance, maintenance
- Landlord typically responsible for roof and structure
- Rent escalations (fixed, CPI, or percentage)
- Renewal options and termination rights
Valuation Factors
NNN investments are valued based on tenant credit quality, lease term, location, and rent basis relative to market. Credit tenants with long terms command lowest cap rates.
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