Understanding Triple Net Properties for Real Estate Investors

Real estate investors are always looking for properties that provide the most value for the least amount of effort. Triple net properties are becoming the hottest trend in real estate investing, allowing investors to expand their commercial real estate portfolios while tenants bear the majority of the costs. If you have questions about triple net properties and how they can potentially benefit you as a real estate investor, the office of Bruce E. Turner in Dallas is here to help.

What is a Triple Net Property?

Triple net properties are those in which the tenant or lessee pay the costs of building insurance, maintenance, and real estate taxes on the premises they occupy in addition to the typical costs associated with leasing property such as rent and utilities. The term “triple net” comes from the three net costs – the insurance, maintenance, and taxes – that can greatly affect the overall profitability of a property from the investor’s perspective. The majority of triple net properties have long lease lengths, and it is not unusual for a triple net property to have a lease that runs 10 or 20 years.

The key for most investors interested in triple net properties is twofold: first, finding a reliably profitable tenant that will be able to continue to cover the costs of a triple net lease for many years, and second, creating a smart leasing structure. If a real estate investor can find a tenant and commercial property that meets these needs, triple net properties can be low risk, profitable holdings for a real estate portfolio.

Benefits and Risks for Investors

There are many benefits to investing in triple net properties. The first is a steady and predictable revenue stream, where you can reasonably rely on a constant rent and no fluctuating costs for maintenance and taxes. This type of investment also benefits investors who do not want to bother with property management, and the potential tax benefits for investors are significant.

Triple net properties do come with a few risks that real estate investors need to consider before investing. The investor relies on a single tenant to maintain costs and payments, which can lead to big issues if the tenant defaults or declares bankruptcy. Another risk is the dependence on a single location, where you hope that rent prices remain constant or increase over time. The flip side to constant revenue streams is that there is not much in terms of upside potential. A long-term lease means being locked into leasing rates for many years, so if the market grows faster than the lease terms, you could be losing out on potential revenue.

Questions? Contact My Office Today

If you have questions or interest in investing in triple net properties in the Dallas area, my office is able to provide you with top tier legal guidance for your real estate investment needs. Call the office or contact us today at Bruce E. Turner with Bennett, Weston, LaJone & Turner, P.C. to speak with an experienced real estate attorney about triple net property investment.

2018-11-29T13:07:35+00:00November 30th, 2018|Commercial Transactions, Real Estate|