What is a triple net lease, what is the difference between single, double and triple net leases?

by | Indiana real estate, Indy Anna, Real Estate Investing

What is a triple net lease, what is the difference between single, double and triple net leases?

Real estate investors should know what a triple net lease is, even if you’re not in commercial real estate – so today we’ll be going over what they are and how they are different from double and single net leases.

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Now for today’s class on Triple Net Leases:

What is a NNN lease and what makes a triple net lease different from a double or single net lease?

Indy Anna explains;

  • What are single, double and triple net leases

  • Who usually benefits more from each one

  • What the differences are between bondable leases and security deposits

So it’s come up from a few folks that are just getting into the world of commercial real estate investing and we just wanted to take a little bit of time with this video to make sure and cover the basics.  Sometimes when I need help answer a question I turn to our experts at BigReia.com/people. 

So, a single net lease is maybe the least common of the ‘net’ leases, but also the easiest for tenants as far as the separation of expenses goes. The rent can be higher with single net leases as the expenses usually mean the property taxes, in addition to the rent. 

What are the benefits?

There isn’t really much of a benefit to these for the owner of the property apart from the cost as in most cases, the tax bill would still be in the owner’s name. 

Any missed payments from the tenant to the local tax authority would be technically in the owner’s name- which obviously most every owner would want to avoid this and simply pay the tax bills themselves.

Double net lease? 

The second type of net lease I’ll cover is a double net lease, which is basically the single net lease with the addition of insurance. Much more popular than a single net lease as there’s less landlord responsibility.

There are some commercial spaces that are more ideal in setup for this- like shared spaces of strip malls, regular malls, a medical pavilion etc.

Responsibilities may differ. 

Obviously if it’s a shared space, there could be common duct work for example that runs between two offices or stores and that’s more of an owner’s responsibility then in a lot of cases, vs a tenants. 

In opposition to this however things that are measurable, such as square footage, is easily more prorated out for things like taxes.  This is why a double net or “NN” lease can make sense in some commercial spaces. 

Triple Net Lease.

The third type of net lease, the triple net lease or “NNN”.  This is the most ideal set up for the owner in some cases as it’s the least financial risk as it includes the taxes, insurance and maintenance. The drawback here can be the time frame these leases usually carry being sometimes up to a decade in length and finding a tenant to sign for that long. 

Another issue here can be futile to make payments and tenants trying to get out of or cancel the lease early due to higher costs and these leases having more weight in some cases being bonded leased.

REMEMBER, You must verify the details.

This is where you truly need to verify with a pro before signing a lease, especially  a bonded lease as bonded basically means ‘Come Hell or high water, absolute lease, no matter what” -basically the tenant’s financial behind is on the line here and there are very strict laws/regulations (state based) about the infrastructure of a triple net bondable lease agreement. 

To be clear, the difference between a bondable lease (the bond part) and a deposit vary in not only amounts typically, but the structure of how they work. 

Damage and deposits.

A traditional deposit is more of a landlord’s way to keep some funds from the tenant in holding ( in amount and location/under  who’s name by State specific law) until the lease period ends, at which point the funds may be returned per the terms of the lease agreement being fully met- usually no damage.

A bond however in terms of a lease is more of the amount that can be gone after IF a tenant fails to meet the obligations of the lease, including trying to terminate the lease. In cases where the lease terms have  been violated, the landlord may file against the bonded amount to (if found proven cause) be compensated for the amount of the bond. 

Bondable lease.

The most favorable outcome for landlords in a net lease would be to have a bondable NNN lease, therefore having the most absolute safety from the tenant’s portion of the lease. Ironically even called an absolute lease. 

Second in line as far as favorable to the landlord would be a “NN” lease, where again, the taxes, insurance, and rent base would be covered- keeping in mind there are commercial spaces that are simply more conducive in setup to these leases. 

Single Net Lease.

The least favorable to the landlord of net leases would be the “N”, or simply single net lease, which is of course the obligation of the tenant to pay taxes as well as rent base. 

So in summary:

I’ve covered for you what net leases are, and the distinguishing factors between single net, double net and triple net leases.

I’ve gone over who benefits more to each type of net lease

AND I’ve gone over the difference between bonded leases vs a security deposit 

So that’s it make sure to go BigReia.com and get our list of over 100 FREE ways to find motivated sellers, how to buy and sell companies at light speed and retire in the next year with over 30k/month coming in on auto pilot: BigReia.com go there and you’ll…

Make the Universe Smile.

Indy Anna
Love (at) BigReia.com
317- 969-5619 (Yes, that’s my real number so please text me first!)

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~ Indy Anna
Love (at) BigReia.com
(YES that's my actual Direct Line and I really do answer lol, so please text me first Thx!)

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