A NNN lease, also known as a triple net lease, removes the burden of property management from an investor’s shoulders. Basically, a NNN lease requires the tenant to cover the additional expense of the property and the base rent. The reason why a NNN lease is called so is because it includes all three additional property expenses – property taxes, insurance fee, and maintenance cost (also known as the ‘three-nets’). So, each ‘N’ of a NNN lease basically represents one ‘Net’ or one additional expense. In some leases, tenants are only required to cover any two additional property expenses along with the base rent. Such arrangements are known as ‘NN leases’ or ‘double net leases’.
Gregory, a 60-year-old investor, was on the verge of his retirement. He decided to do a tax-deferred exchange (1031 Exchange). Though he had a couple of properties under his name, he chose to relinquish his rental property because it had already depreciated. Upon successfully closing on the sale of his relinquished property, he took the help of a Qualified Intermediary. And reinvested the proceeds on a NNN properties for 1031. By doing so, he helped himself in securing an income-producing property against a depreciated property. At the end of the exchange, Gregory gained an improved income-producing property. This property was also costlier than his relinquished property. Gregory also secured a regular flow of income for the rest of his life and that too without the burden of property management.