3 Advantages and Disadvantages of Triple Net Lease Contract

Real estate sector is often considered as the most volatile yet lucrative business in the world because if your cards right, you can earn huge amounts of profits. However, the past few months have been ruthless for most of the businesses including the real estate. Fortunately, the virus has started to subside and businesses are now standing back on their feet, but estate agents are fearing ‘boom followed by bust’. The post-pandemic real estate market has become a lot different than the pre-pandemic market because the shackles are off now.

You can ease back into safe investments like buying rental properties to generate passive income, and one of them can be gym-based nnn contracts because people are rushing to gyms nowadays to get rid of pandemic weight gain. NNN contracts are different from other rental contracts in the sense that tenant is not only liable to pay gross rent but he will also pay for the expenses of the property. However, such contracts do not offer only rainbows and candies to the landlords because they also have their demerits. We have discussed here three advantages and disadvantages of NNN contracts so that you, as a landlord, can make an informed decision.

3 Advantages of NNN Lease Contracts

  • Consistent Income:

The most significant advantage of NNN lease contracts for landlords is that they can generate consistent income for a lengthy period of time. You do not have to worry about renewing the contracts repeatedly because deals are mostly signed for a tenure of more than ten years. As a result, you will be getting a guaranteed income from the property, which can be saved and invested somewhere else. Moreover, it needs to be understood that the actual rent of the property borne by the tenant will be greater than the rental income because, in NNN contracts, tenants are also responsible for the expenditures related to the property.

  • Limited responsibilites:

Renting properties on NNN lease contracts generate passive income in the literal sense because landlords have incredibly limited or no responsibilities regarding the property. Be it the property tax, maintenance issues or the overall caretaking of the property, landlords are relieved from all the responsibilities, unlike the traditional rental agreements.

  • Freedom to sell:

Under triple net lease agreements, landlords have the full freedom to sell their properties to get a good return on their investments. The lease remains intact and is transferred to the name of the new owner, who has to abide by the terms and conditions of the existing contract. Therefore, everyone including the tenants get a fair deal because they would not have to vacate the property if the ownership changes.   

3 Disadvantages of NNN Lease Contracts

  • Fixed income:

Getting a consistent fixed income may sound attractive, but it has a downside as well because you cannot increase the rent during the course of contract which lasts for many years. Therefore, it the value of property rise in your area, you cannot take advantage from it because you will be bound by contract.

  • Liability:

Many landlords think that tenants are required to take care of taxes, premiums and maintenance costs, so they are not liable for anything. But, the truth of the matter is that a landlord is an owner so if the tenant fails to pay the taxes or premiums, it is going to fall on the landlord’s shoulders.

  • High expenses after lease:

The owner has to spend a considerable amount of money on the property once the contract expires because many tenants do not take care of the property and only do the bare essentials. Therefore, depending on the state of the property, the owner will have to spend huge sums of money on renovation before leasing the property to another tenant.

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