What Exactly is a Triple Net Lease?
A triple net lease (sometimes referred to as NNN) is generally a long-term contract of 20 years or more, where the tenant pays property taxes, building insurance, and maintenance expenses in addition to rent. The lease is so-called because the rent is paid after (or net of) these three types of expenses. Triple net leases are the creme de la creme of lease arrangements, especially when they’re made with a single tenant carrying a quality credit rating. Less common are “double net leases,” where the tenant covers only taxes and insurance and “single net leases,” where the tenant only pays property tax in addition to rent. In contrast, “gross leases” are where the tenant pays rent and the landlord pays all expenses. Triple net leases are often the result of a real estate sale and leaseback arrangement. A retailer like Home Depot (NYSE: HD), which both owns and occupies its own locations sells the property to a REIT or other investor. It sweetens the sale by agreeing to a long-term lease
