Unlocking Wealth with Triple Net Leases: The Game-Changer You Need to Know About

Today, we’re talking about a game-changing way to invest in real estate that you might not know about yet. It's commercial real estate, specifically with Triple Net (NNN) leases. This approach has transformed my portfolio, and if you’re looking to expand yours or get into commercial real estate for the first time, this could be a breakthrough for you.

What is Commercial Real Estate?

So, what is commercial real estate? It’s any property used for business purposes—office buildings, retail spaces, and industrial properties.  Multi-family residential (with five or more units) also is considered “commercial” real estate. 

One of the key differences between commercial and residential (1-4 units) real estate is what the lenders are looking at. In residential, lenders are focused on you—your income, your credit score, and your debt-to-income ratio. But in commercial, the focus shifts to the property’s ability to generate income. They’re assessing the property as a business, which, let’s face it, is precisely what it is.

The Power of Triple Net (NNN) Leases

Now, let’s get into Triple Net leases. Triple net (NNN) leases are leases that show up where the tenant is another business (e.g., in retail, office, or industrial properties). If you’re used to the typical landlord-tenant relationship, where you pay the rent and the landlord covers property taxes, insurance, and maintenance, NNN flips that script. With a NNN lease, the tenant pays the rent plus the property taxes, insurance, and maintenance. That means you, as the landlord, get a steady income stream without worrying about these ongoing variable expenses. Sounds pretty great, right?

Here’s why I love Triple Net leases: they’re long-term, often 15 to 20 years and usually have built-in rent increases. So, your income is not just steady, it’s growing. And because the tenant is usually a well-established business, your risk is significantly lower. The expenses? With the exception of your debt service, they’re generally covered by the tenant. So, if the roof needs fixing or property taxes go up, that’s on them, not you.

For tenants, the appeal is clear. They get control over their space and can manage it to fit their business needs without asking for approval on every little change. Plus, those expenses are often tax-deductible for them, which is a nice bonus.

Key Considerations When Investing

If you’re considering investing, location is the first thing to consider. Location is critical in any real estate investment, but especially in commercial. The ideal location will depend on the type of property and what potential tenants need—industrial properties should be near transportation hubs, while retail spaces need high-traffic areas.

And let’s not forget the tenant. Ideally, you’ll want a solid, established business as your tenant because the stronger the business, the more secure your investment. Look at their creditworthiness and the lease terms—rent escalation clauses, renewal options, etc. Make sure to get a lawyer and/or commercial broker who knows these types of leases inside and out to help you navigate.

Planning Your Exit Strategy

Now, let’s talk about exit strategies. You should always know your exit plan before you even get started. Whether holding long-term, planning to sell, or looking at a cash-out refinance, be clear on how you’ll get out when the time is right. Also, have 2-3 back-up exit strategies that can be utilized if conditions change. We typically hold properties for 4 to 6 years, then sell to institutional buyers. We could also sell sooner if conditions warrant, hold longer and continue to cash-flow, and/or do a cash-out refinance.  it’s essential to have a flexible plan, especially in a shifting market.

There are risks, of course—tenant default, market fluctuations, and long-term vacancies. But these risks can be managed with careful due diligence and a solid strategy.

Take Action: Get Involved

So, if you’re ready to explore Triple Net leases, take action. Join our complimentary Investor Club. Our Investor Club will give you access to investment opportunities, investing along side seasoned operators in the commercial space, that are not available to the general public. Click here to get on a zoom call with one of us. Let’s discuss your goals and how you, too, can benefit from these opportunities.