Triple Net Lease NNN

· 2 min read
A triple net lease — written as NNN in listings — is a commercial lease where the tenant pays property taxes, insurance, and maintenance on…

A triple net lease — written as NNN in listings — is a commercial lease where the tenant pays property taxes, insurance, and maintenance on top of rent, which means the landlord collects income with almost zero ongoing expenses.

It’s the closest thing to truly passive real estate income. You own the building. The tenant pays rent plus all three “nets” (taxes, insurance, maintenance). Your only responsibility is the mortgage payment and maybe the roof and structure, depending on the lease terms.

How NNN Leases Work

In a standard gross lease, the landlord pays all operating expenses and builds those costs into the rent. A triple net lease flips that arrangement. The tenant takes on:

  • Property taxes — paid directly or reimbursed to the landlord
  • Insurance — building coverage, not just the tenant’s contents
  • Maintenance/CAM — common area maintenance, repairs, landscaping

The rent itself — called “base rent” — is usually lower than a gross lease because the tenant is shouldering the operating costs separately. But the landlord’s net income can actually be higher because there’s no expense creep eating into margins.

Who Uses NNN Leases

Think Walgreens, Dollar General, Starbucks, auto parts stores, and fast food chains. These are credit tenants — large companies with strong financial backing who sign 10-25 year leases. That’s the appeal: predictable income for decades from a tenant that’s unlikely to default.

A typical NNN deal might look like this: you buy a standalone Walgreens building for $2.5 million. The lease runs 20 years with 2% annual rent bumps. Base rent is $125,000/year. Walgreens pays all taxes, insurance, and maintenance. Your only cost is the mortgage.

NNN Cap Rates

Because NNN properties carry lower risk, they trade at lower cap rates — typically 4.5-6.5% for investment-grade tenants. A Dollar General in a rural area might trade at a 6.5% cap rate. A Chick-fil-A in a suburban corridor could be 4.5%. The stronger the tenant’s credit and the longer the remaining lease term, the lower the cap rate.

Risks to Watch

The biggest risk is tenant default or non-renewal. If your single-tenant building goes vacant, income drops to zero instantly while you still carry the mortgage. Lease expiration risk is real too — a tenant with 3 years left on a lease might not renew, leaving you with a building specifically designed for their use.

Location matters more than the tenant’s brand name. A Starbucks NNN lease in a growing suburb is safer than one in a declining strip mall, even though it’s the same company.

Run the financing numbers on NNN deals with our mortgage calculator, and explore related investment concepts in the glossary.