Triple Net Lease (NNN)
A lease where the tenant pays property taxes, insurance, and maintenance costs in addition to rent.
Definition
A triple net lease (NNN) is a commercial lease structure where the tenant pays not only rent but also some or all of the property's operating expenses: property taxes (one 'net'), building insurance (second 'net'), and maintenance/repairs (third 'net'). The landlord's income is largely passive.
NNN leases are popular with investors seeking passive income — the property essentially runs itself. Tenants are typically national or regional credit tenants (Starbucks, Dollar General, CVS, Walgreens) with long-term leases (10–25 years) and built-in rent escalations.
The trade-off: NNN properties trade at very low cap rates (4–6%) because of the stability and passivity they provide. They're priced more like bonds than value-add opportunities. Investors who want yield without management headaches buy NNN; investors who want outsized returns look elsewhere.
Related Terms
Also in "T"
Tax Deed
A deed issued to the winning bidder at a tax deed sale — transferring ownership of a property seized for unpaid taxes.
Tax Lien
A government claim against a property for unpaid property taxes — investors can purchase these liens and earn interest.
Title
Legal ownership rights to a property — the bundle of rights that come with owning real estate.