Some Basic Benefits of a Triple Net Gateway Lease
When leasing commercial real estate, there is a popular property type known as the triple n or 3N meaning 3 net terms given to tenants with high credit standing. What this means is that the tenant is responsible to pay the leased real estate taxes or tax net, insurance, and all property maintenance.
Commercial properly owner would do well to invest in triple net deals since there is no management responsibility involved and you get better profitability without the associated headaches. Since the tenants they would get would be only those who qualify, they are assured of a long-term lease. With this type of lease, the property owner is assured of a stable net income and he does not need to worry about taxes and insurance of their leased real estate investment.
The tripe n arrangement seems to favor the property owner more and then tenant so it involves a higher risk to them. Nevertheless, this is not the case for retail and some industrial rentals because of various reasons which I hope to cite.
One reason is that retail and industrial rentals have more control of the property, so if your need plumbing system installation or roof repairs, you don’t have to ask the property owner for approval. The tenants are able to hire contractors or anyone who can install or repair various fixtures which are necessary for their present needs. But tenants are limited in that the contractors that they hire should use quality materials and not substandard ones that would compromise the life of the fixture. Tenants usually have the right to make small changes to the property, and operate independent of the property owner’s control. But the agreement that was signed prior to occupancy is moderated by the lease.
Another benefit one gets from a triple net lease is the low rate of rental compared to gross rents. Since they are responsible for operational expenses, the low rents are able to sort of balance the equation which is typical of retail and industrial rentals.
Before the signing of the contract for this Triple Net Gateway lease, the tenants should have identified the risk factors so that it needs quality risk management and this means that they must be cautious when negotiating caps. This includes maximum amount that you are liable for over the basic rent amount each year. No matter how well or how poorly your business goes during the lease term, you are liable for the extra expenses for the leased property. When carried out correctly you will see that a triple net lease will not only benefit the property owner, it will also benefit the tenant.
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