Leaning toward NNN lease US properties? Triple net (NNN) leases can offer dependable passive income and low landlord duties—but they need smart structuring and tenant choice. This guide walks you through structuring net lease property investment deals—from understanding lease terms and choosing tenants to financing, risks, and real-world examples.
1. What Is a Triple Net (NNN) Lease?
A triple net lease (NNN) shifts major property costs—taxes, insurance, and maintenance—to the tenant, on top of base rent and utilities. Think of it as a near-passive income model: the tenant handles operational costs, leaving the landlord with a clean, predictable revenue stream.
Key features:
- Tenants pay property taxes, building insurance, and CAM/maintenance .
- Lease terms often run 10–15 years, with options to extend.
- Tenants—often credit-worthy entities like Walgreens, CVS, Dollar General—provide stability.
2. Why Investors Like NNN Leases
- Low management burden: Tenants take care of repairs and regular expenses, freeing you from most day-to-day duties .
- Predictable rental income: With tenants covering expenses, rent becomes more stable and reliable.
- Inflation hedge: Many NNN leases include built-in rent escalations, helping align income with rising costs.
- Investor appeal: Long-term, low-maintenance income attracts both individuals and REITs like Realty Income or W. P. Carey .
3. Lease Structures to Know
Standard NNN Lease
Tenant pays taxes, insurance, CAM; landlord responsible for major structural repairs unless otherwise shaded .
Absolute/National Bondable NNN
Tenant responsible for everything—including structural repairs—even after disaster. Rent is “hell-or-high water.” Common with credit tenants.
Short-Term Leases (5–7 years)
Sometimes used in industrial or data center settings to allow investor repositioning.
4. Tenant Selection & Credit
Your tenant’s credit strength is crucial:
- Focus on recession-proof tenants: pharmacies, essential retailers, fast food .
- National brands like Walgreens or Dollar General improve financing terms.
- Check tenant’s business financials to ensure long-term viability.
5. Financing NNN Properties
NNN deals attract favorable loan terms:
- Competitive mortgage rates: often under 6–7%, depending on tenant strength and market.
- CMBS and commercial loans: 20–25-year amortizations, full recourse optional.
- 1031 Exchange: Sellers can defer capital gains by exchanging into other net lease properties.
6. Evaluating & Structuring a Deal
A. Key Metrics
- Cap Rate = NOI ÷ Price; typical NNN deals range between 6–8%, rising recently due to rate hikes .
- Lease length and escalations add resilience.
- Tenant coverage analysis: NOI vs tenant’s business revenue.
B. Negotiable Terms
- Pass-through caps and audit rights on CAM, insurance, taxes.
- Renewal options with preset escalation rates.
- Tenant responsibilities: structural vs routine maintenance.
C. Due Diligence
- Verify tenant is paying taxes and insurance.
- Review lease thoroughly for elusive landlord responsibilities ($$$).
- Confirm property condition—especially in non-absolute leases.
7. Market Trends for 2025
- Cap rates are rising: Investors now expect 6.5%+ for retail, 7–8% for industrial/office .
- Bonus depreciation return in 2026 may influence repurchases .
- Tenant composition shifts: More office to industrial conversions in net lease portfolios .
- Rising vacancy in bankrupt tenant situations: NNN Reit took back 64 units recently, re-leasing half .
8. Exit Strategies & Liquidity
- Sell through 1031 exchanges for tax deferral.
- Refinance after 5–7 years based on stabilized NOI.
- Hold long-term for ongoing cash flow and portfolio stability.
- Liquid options: Exchange into REIT shares like Realty Income (O) or NNN Reit.
9. Real-World Investor Models
- Realty Income (Ticker: O): Owns 15,000+ properties leased under NNN with brands like Walgreens.
- W.P. Carey: Multi-tenant NNN holdings (industrial, office) globally—strong dividend yield.
- Store Capital: 80% sale-leaseback deals with private tenants under NNN structure.
10. Risks to Watch
- Tenant default can halt your income stream.
- Interest rate shifts affect refinancing and cap rates .
- Property-specific issues: Roof or structural repair caveats.
- Market concentration: Too many similar properties can limit sales.
Summary Table
| Step | Action |
| 1. Tenant Choice | Creditworthy, essential service tenants |
| 2. Lease Type | Absolute NNN preferred |
| 3. Lease Terms | 10+ years, escalations, renewal options |
| 4. Rent & Escalation | Match or exceed inflation |
| 5. Financing | Lock in long-term low rates |
| 6. Due Diligence | Check lease, property, tenant finances |
| 7. Exit Planning | 1031, refinance, hold, or REIT exit |
| 8. Risk Management | Tenant defaults & interest changes |
