Investors in search of real estate spaces would, undoubtedly, come across different offers by different organizations regarding the purchase of the property. Offers like absolute net leases, modified gross leases, triple net leases, etc., will be presented for consideration.
The NNN and gross net leases are, however, preferred by many investors over the rest. While they possess striking similarities, both lease types are significantly different, each having unique benefits and potential risks.
This article would help you understand the differences in both leases and allow you to know what to expect from investing in either market. Before we dive into that, let us see the meaning of both lease systems.
What is a NNN Lease
Triple net (NNN) lease agreements demand that you, the tenant, pay the actual monthly base rent plus other ongoing expenses. These expenses cover the costs of property insurance, tax, and overall maintenance.
The triple net lease is the most common type of commercial lease system, as it is done in virtually every developing and developed city and for all professional properties in the world today. In recent times, you can find CVS NNN properties for sale, dollar general NNN for sale, and many more.
What is a Gross Lease
On the other hand, the gross lease system is all-inclusive of the costs connected with the sale of the property. This means that the expenses are easy to understand, as the tenant pays a single sum: the base rent, while the landlord pays all other operating costs. This lease form ensures that you can easily calculate the amount you owe, making due payment less daunting.
Differences Between a Triple Net Lease and a Gross Lease
Below are some of the major distinctions evident in both lease systems: the NNN lease and the gross lease system.
- The rate of prices of the monthly base rents of either lease system differs from the other significantly. Since a triple net system gives the tenant the full responsibility of maintaining the leased property, the base rent is often placed at a low price. Meanwhile, a gross lease agreement features a relatively higher base rent price, as the tenant is less concerned with other expenses.
- A tenant in a triple-net lease property is usually placed in a disadvantaged position, especially when a professional real estate broker does not guide their negotiations. This is why we advise you to seek the help of top net lease brokers before you engage in such a contract. However, any agreement in a gross lease system can easily be beneficial to both parties, that is, the buyer and the seller of the property.
- The landlord is responsible for paying the common area management (CAM) cost in a gross lease system. This cost fluctuates from time to time, and when the prices skydive, the landlord may decide to increase the monthly base rent. However, tenants in triple net lease properties do not have to worry about these changes in base rent price, as they are originally responsible for the payment of property CAM costs.
- For the landlord, the triple net lease system can be a source of major rental income. Landlords of a NNN lease property have little or no reason to spend on the property because the tenants cover most expenses. Meanwhile, owners of gross lease properties have to worry about the payment of fluctuating CAM costs, and this causes immense effects on their overall income flow.
The major similarity between both types of contracts is that they have to do with real estate properties. However, both contracts have their benefits as long as you find a reputable broker to handle your negotiations. Suppose you need expert triple net lease brokers to get the best deals from, then your best option is the Net Lease World.