Perks of a NNN lease
✔ Freedom from property management
✔ Savings on property maintenance
✔ Frequent hike in property rent
✔ Regular flow of cash
✔ Defer Taxes Easily
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.
Regular flow of cash- One of the biggest benefits of possessing a NNN property is that it will never run you out of cash. Since the majority of NNN tenants have high credit ratings and strong financial support, NNN investors enjoy a regular flow of income.
Savings on property maintenance –As NNN leases require tenants to cover the maintenance expense of the property, investors don’t need to spend a single penny on the maintenance of NNN properties.
Advantage of tax deferment – NNN investors can defer capital gains taxes upon exchanging their properties using 1031 Exchange. As no tax is recognized on the exchange, investors always have the option to acquire bigger and better replacement properties.
Frequent Rent Increases –On account of renewal of a NNN lease or even during the primary term of the agreement, investors can expect a regular increase in the rent. This ensures that NNN investors enjoy a hike in their income after every particular interval of time.
Mode of passive investment – ‘NNN lease’ is a blessing for passive investors. Some investors don’t like to get exposed to the risks directly. Since the burden of paying property expenses is upon the tenant’s head, NNN investors enjoy 100% passive investment.
© 2020 1031Xchange.com. All Rights Reserved.
1031Xchange.com is a website platform owned by Investment Net LLC. (“Platform”). Investment Net LLC is not a registered broker-dealer. Private investment marketing and other services advertised on this Platform are offered by connecting investors with relevant Sale Representatives/Broker-Dealers/Real Estate Agents.
IRC Section 1031, IRC Section 1033, and IRC Section 721 are complex tax codes; therefore, all the investors/clients/consumers are advised to consult their tax and legal professional for details regarding their situation on any kind of investment. There are material risks every investor should know, associated with investing in 1031 Exchange properties, Delaware Statutory Trust (DST) and any other kind of Real Estate Properties. The risks include tenant vacancies; declining market values; potential loss of entire investment principal; that past performance is not a guarantee of future results; that potential cash flow, potential returns, and potential appreciation are not guaranteed in any way; adverse tax consequences and that real estate is typically an illiquid investment. This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the Confidential Private Placement Memorandum. Please be aware that this material does not replace the PPM.