Top 5 Benefits of Buying a NNN Triple Net Property
Buying a Triple Net property comes with singular benefits to investors that other investment properties don’t offer. Nowadays there are many investors transitioning from the traditional investment property that requires the investor’s heavily involvement in managing the property, into triple net properties looking for a truly passive income investment. Although buying a triple net property have many benefits, we are going to focus on the Top 5 Benefits of Buying a NNN property.
1. Your Rental Income is Net of Property Taxes, Insurance and Maintenance Costs
When you buy a triple net property the tenant is responsible for paying the property taxes, property and liability insurance, and maintenance costs. In an Absolute NNN Lease, the tenant is also responsible for the capital improvements, such as roof, structure, parking lot, air conditioning system, among others. A triple net property is a truly passive income investment, in which the rent is completely net.
2. No Landlord Management Responsibilities
One singular and unique benefit of buying a single tenant triple net property is that there are no landlord’s management responsibilities. The tenant takes care of everything on a daily basis, and you will never receive a phone call from the tenant saying that the air conditioning unit is not working or the roof is leaking, the Tenant is responsible to take care of that. I have personally seen many multi family investors selling their properties to transition into a single tenant triple net property to avoid the daily hassles of managing a residential property. Moreover, if you buy a single tenant triple net property, the fact that you only have to deal with one tenant certainly reduces the hassles of having to deal with multiple tenants.
3. Long Term Leases with Rent Increases and Renewal Options
In a triple not property leases are usually 10, 15 and 20 years long, given the investor the assurance that the tenant is committed with the property for the long term. Different than multi family, as an example, in which leases renew every year, triple net property leases are made at longer term, and are made to give both the Tenant and Landlord a long term commitment with the property. Moreover, most leases include rental increases that serve as hedge for inflation, and automatic renewal options in which the tenant can continue extending the lease every five years without modifying the original lease. However, it is important to highlight that the renewal options are discretionary, so the Tenant is not obligated to exercise them.
4. Tax Benefits and Depreciation
Another excellent benefit of buying a triple net property is the tax benefits that comes with the opportunity to depreciate the building, which will reduce your taxable rental income. Depending on the particular state rules, some states allow you to take an accelerated depreciation, which means you can deduct a higher percentage annually, which can substantially reduce your taxable rental income. It is important to highlight that the depreciation benefit does not apply to ground leases, it has to be a fee simple ownership in which you own both the land and the building. Every state and the IRS have different rules for the depreciation allowance, so it is important that you consult first with your accountant or tax attorney to get more information on the specific rules for the property that you are interested.
5. Ideal for 1031 Exchange
Buying a triple net property is an ideal option for your 1031 exchange replacement property. Nowadays, many investors are deciding to choose a single tenant triple net property as their replacement property for the simplicity and convenience of owning a truly passive income investment with no landlord responsibilities. In addition, if you are considering retirement, buying a triple net property is an ideal option to have a steady and fixed income without landlord management involvement.
In summary, a triple net property is an excellent alternative for the investor that is looking for a truly passive income investment without the management responsibilities. There are also risks involve in buying a triple net property that we discussed in our previous blog post Top 5 Risks of Buying a Triple Net Property.
At Casablanca, we specialize in Selling Triple Net Properties nationwide USA. We have helped many clients in finding and negotiating the best triple net property according to their goals and risk tolerance, and we would be glad to assist you as well. We offer our Buyers Free Buyer Representation and We Pay for Your Closing Costs up to $10,000.
If you have any questions, feel free to contact me directly at 407-205-7570 or you can email me at [email protected]