If you're looking for the best way to make some money in real estate, you need to understand the ins and outs of the triple net commercial lease. Understanding your lease options as an investor is the best way to decrease costs, increase revenue and increase the value of your commercial property.
A triple net commercial lease is often referred to as a NNN or net-net-net lease. In a triple net commercial lease the tenant, or lessee, pays the landlord, or lessor, rent plus also covers the real estate taxes, insurance and maintenance. This kind of lease is used often in commercial real estate. It is very popular amongst multi-tenant industrial and retail properties.
Other versions of the net lease are the single and double net lease. In a single net lease the tenant pays rent and real estate taxes. In a double net lease the tenant pays rent, taxes and insurance. As you can see there is a variety of ways to approach a commercial real estate deal.
Net lease deals allow for less capital outlay for the investor and lower fixed rents for the tenant. Some tenants are resistant to signing up for a net lease as they can make their variable costs higher and unpredictable. For example, maintenance like replacing or fixing roofs, gutters, and other parts of the building could add on to their costs. It may make budgeting a little more difficult.
Commercial real estate rental offers many advantages over residential to the investor if you know what you're doing. The primary advantage of commercial over residential is that commercial properties are valued based on their income not comparable sales. So the more you can increase your net income by decreasing your costs or increasing your revenue then the more you increase the value of your property.
By pushing the costs of maintenance, insurance and taxes onto the tenants, net income increases and so does the value of your property. The more you can increase the monthly revenue the more positive cash flow, profit that is, you have.
So in order to make the most out of commercial real estate you need a plan. First, acquire or save up the appropriate down payment. Find some decent commercial real estate, preferably a multi-tenant industrial or retail piece. Do the necessary amount of cosmetic work to make the property bring in a good amount of income. Next, have the tenants sign a triple net commercial lease. They pay the mortgage through the rent and cover the major costs of the property, leaving only the "white meat" of profits for you to further invest or spend.
The Triple Net Commercial Lease is a great tool for generating maximum income while reducing risk and income fluctuations at your commercial real estate properties.
If you, like we do, rely on income from your investment portfolio to support your family, you know it's important to make sure you have enough coming in each month to pay your bills and provide for your lifestyle. Income fluctuations due to expense increases can put an unwelcome dent in your standard of living. Triple net leases help to even out these bumps by passing the burden of the costs on to your tenant.
If you need help buying, analyzing or improving operations for your commercial real estate properties, please contact TheRealWealthCompany.com - we are fee-based commercial investment advisers who practice what we preach.