馃攳
Triple Net Lease Pros and Cons [What Investors and Landlords Need to Know] - YouTube
Channel: Tyler Cauble
[0]
if you're looking at leasing commercial
[1]
space you have seen
[3]
several different variations of lease
[5]
structures from which to choose the
[6]
triple net lease is one of the most
[9]
attractive for investors and landlords
[11]
but it also has its
[12]
fair share of cons here's what landlords
[14]
need to know about triple net leases
[22]
first the pros of a triple net lease
[24]
number one
[25]
minimal landlord responsibilities the
[27]
three nets
[28]
in a triple net lease are common area
[30]
maintenance property taxes
[32]
and building insurance which get passed
[34]
through directly to the tenants
[36]
each tenant will pay their proportionate
[38]
share of these expenses and property
[40]
management is
[41]
often covered under common air
[42]
maintenance meaning a landlord will have
[45]
minimal responsibility when it comes to
[47]
expenses and maintenance of the property
[49]
because of this it's possible and fairly
[51]
common for investors to
[53]
buy triple net properties across the
[55]
country and not just in their backyard
[57]
number two long-term occupancy some
[59]
triple net properties especially single
[62]
tenant deals with national or
[63]
regional credit tenants will come with
[65]
longer term occupancy
[66]
it's not uncommon to find these
[68]
properties with 10
[70]
15 or even 20 plus year leases depending
[72]
on the type of property
[74]
tenant build out etc landlords and
[76]
investors find certainty in the fact
[78]
that they will be collecting that rent
[80]
for quite some time without having to
[82]
worry about replacing vacant units
[84]
number three reliable passive income
[87]
triple net leases are the epitome
[89]
of mailbox money as far as passive
[91]
income goes
[92]
triple net investments are among the top
[94]
performing since the leases are often
[96]
guaranteed by tenants with strong credit
[98]
that tend to stay in place for years and
[100]
years
[101]
if you have a property manager
[102]
collecting the rent and handling
[104]
any issues with your tenant then you'll
[106]
have very little else to do with the
[107]
property except for depositing those
[109]
checks or handling tenant turnover when
[111]
the time comes
[112]
number four leases are transferable
[115]
similar to most other commercial real
[116]
estate investments
[117]
triple net leases are transferable
[120]
between owners meaning they can trade
[121]
hands
[122]
multiple times you could purchase a
[124]
long-term lease
[125]
cash flow it for a few years and then
[127]
flip it to the next investor who can do
[129]
the same strategy while commercial real
[131]
estate isn't the most
[132]
liquid asset class it can usually be
[134]
sold and transferred within a reasonable
[136]
amount of time
[137]
if you're needing to move capital to
[139]
another project or simply cash out
[141]
number five protection from expense
[143]
increases
[144]
for many investors this pro alone is the
[147]
reason they'll purchase triple net
[148]
investments
[148]
since the expenses of owning and
[150]
operating the property are passed
[151]
through directly to the tenants that
[153]
benefit from it
[154]
if any of these expenses increase the
[156]
landlord isn't on the hook for covering
[157]
the difference
[158]
that means if property taxes increase or
[160]
your cam is higher because you had
[162]
unexpected snow removal or other
[164]
maintenance your tenants will foot the
[165]
bell
[165]
now for the cons of a triple net lease
[167]
number one limited upside potential
[170]
since triple net leases usually come
[172]
with long-term tenants at fixed rents
[174]
there isn't much opportunity for a
[176]
value-add investor to
[178]
increase the income potential and value
[180]
of the property now
[181]
that's not to say that it can't be done
[183]
at all you'll just have to wait until
[184]
that tenant moves out or the lease
[186]
expires before you can make
[187]
any updates and increase those rents for
[190]
investors that are looking to place
[191]
capital in secure investments and
[193]
benefit from passive income
[194]
this limitation for greater upside isn't
[197]
a big deal but for
[198]
those value-add folks out there that
[199]
want to push their yields it can be
[201]
fairly unattractive
[202]
number two turnover risks single tenant
[205]
net leases
[206]
especially can be built out to
[207]
accommodate the specific
[209]
needs of the current tenant meaning that
[211]
the space could be difficult to release
[213]
for the next tenant the floor plans may
[215]
need to be adjusted roll-up doors may
[217]
need to be added in
[218]
and more meaning it could get expensive
[220]
to renovate the space for an incoming
[222]
group
[222]
you could also have a location that was
[224]
only ideal for the first tenant
[226]
adding to your higher rollover costs and
[229]
difficulty finding the next tenant
[230]
so should you do a triple net lease i
[233]
tend to lean towards an
[234]
absolute yes on this one however your
[237]
lease structure can depend on other
[239]
factors such as the type of property and
[241]
how sophisticated your potential tenants
[243]
are
[243]
you'll also want to have that
[244]
conversation with your cpa and your
[246]
attorney to see which route works best
[248]
for you
[249]
triple net leases do come with many
[251]
benefits for the landlords which is why
[252]
they're becoming more and more common
[254]
among not only retail and restaurant
[256]
spaces but also office and industrial
[258]
real estate
[258]
okay now that you know the pros and cons
[261]
of triple net leases
[262]
check out this video here where we do a
[264]
deep dive into investing in triple net
[266]
properties
[267]
i'll see you there
[267]
[Music]
Most Recent Videos:
You can go back to the homepage right here: Homepage