The Pros And Cons of A Triple Net Lease (NNN) Agreement?

By Benjamin Ficker

Benjamin Ficker is a Multifamily Investment Broker with KW Commercial. With a two-decade career, he delivers unparalleled value and personalized service to clients, earning trust as a reliable advisor. His broad spectrum of experience has led to success for hundreds of his clients.

Have you ever dreamed of owning real estate but don’t want the headache of constant upkeep and bills? A Triple Net Lease (NNN) might be the perfect solution for you! With this type of lease, tenants take care of not just rent, but also property taxes, insurance, and maintenance costs. Let’s explore the pros and cons so you can decide if it’s the right move for your investment.

NNN leases are a favorite in commercial real estate because they offer long-term, stable income. Did you know that over 60% of commercial real estate investments are made using NNN leases? This is because they typically last 10 to 25 years, giving landlords a reliable income stream that requires minimal management. Here are three reasons why landlords love NNN leases:

Stable Income with Less Work. One of the biggest reasons landlords love NNN leases is the steady, low-effort income they provide. Since tenants take on the responsibility for taxes, insurance, and even maintenance, landlords don’t have to deal with unexpected property expenses. It’s a win-win for anyone looking to earn passive income without the hassle of managing day-to-day property issues. Plus, with cap rates ranging from 4% to 7% (FNRP), investors can expect a solid, though sometimes modest, return.

Hands-Off Management. Owning a property can be demanding, with constant repairs and rising insurance costs making it feel like a full-time job. However, with a Triple Net Lease (NNN), these responsibilities shift to the tenant. As a landlord, you get to enjoy the perks of ownership without managing the day-to-day upkeep. It’s a great option for those who prefer minimal involvement but still want a steady, reliable income from their investment.

Risks and Drawbacks. While NNN leases offer stable returns, they come with a few risks. For starters, landlords might not see as much profit growth as they would with other types of leases. Depending on where you live, rent increases are usually fixed, so the earning potential is somewhat limited. If the tenant vacates, finding a replacement might take time, leaving you responsible for property costs during that period. So while the risk is low, it’s not entirely without downside.

If you’re looking for long-term stability and hands-off income, an NNN lease might be the perfect choice. However, it’s important to consider the limited upside in profit growth and the risk of vacancies. Think carefully about your goals and risk tolerance before diving in. If you want to know more about how an NNN lease can work for you, you can reach out to us for personalized advice and to explore how this investment could fit into your portfolio. We’re here to help guide you every step of the way.