The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful:
Triple net real estate in a type of investment real estate where the owner of the property enters into a specific type of lease with their tenant. In this lease, the tenant assumes responsibility for all operations and operating costs of the property, providing the real estate owner with a single net rental check each payment term. The tenant is accountable for the insurance, taxes, and maintenance of the property, reimbursing the land owner for these expenses when they arise.
Richard Wilson: To begin with what is triple net real estate?
Peter Von Der Ahe: Well, net leased properties are essentially, it’s any type of investment real estate where the tenant has basically entered into a lease with the owner of the real estate itself and in that lease it says they are going to pay you rent and operate the property. As far as the economics of the cash flows go, your operations are net of any real estate tax expense, insurance expense, or any operating costs. In the true, pure, triple net definition that would include every, you know, any maintenance or operating of a property.
Peter: When you get into these properties, there’s a lot of nuance and all those nuances are actually explained and need to be further researched in the lease. Because when you get into this, there’s triple net, there’s double net, you know, and everything in between. There’s a whole lot of kind of slang terms that people use in the industry, sometimes correctly sometimes incorrectly, so if you start with the purest this is a piece of real estate that is leased to a tenant that takes care of all the operations and all the expenses and all you get is one net rental check and then there’s everything in between.
Richard: Right. Right, okay, makes sense.