In a "net lease", in addition to base rent, the tenant or lessee is responsible for paying some or all of the recoverable expenses related to real-estate ownership.
Brand new NN Deals with long-term builder warranties covering the roof and sometimes structure can be attractive to investors looking for a higher return.
In NNN leases, tenants take on the responsibility of major expenses, such as HVAC and roof repairs, keeping the operation cost lower for the landlord.
Investors prefer to hold these assets long-term, which means there is likely some wear and tear maintenance, as well as a roof that will need to be replaced at some point.
With an absolute net lease in, the risk of expenses associated with building maintenance shifts solely to the tenant, allowing the landlord to receive a 100% passive investment.
The tenant makes monthly payments to the landlord, while the real estate (and often rent bumps called for in the lease) provides the investor protection against inflation.
NNN lease investments provide similar tax advantages as tax-exempt municipal bonds without forcing the investor to settle for lower yields.
[13][14] NNN leased investments are also financeable, allowing the investor to leverage the credit of their tenant while also creating tax-deductible interest payments.