If you work in commercial real estate, it’s likely you’ve heard the word triple net (NNN) lease at some point or another.
These types of properties are a lucrative option for investors, especially those looking to secure an additional stream of income.
Below, we explore the benefits of triple net leases and how to find triple net properties for sale through sales listings and off-market technology.
What is a Triple Net (NNN) Lease?
A triple net (NNN) lease is one where the tenant(s) of a property take on responsibility for all operating expenses associated with a property, on top of the cost of rent.
Triple net, meaning “net-net-net,” is often abbreviated as just “NNN.”
Each “net,” or “N,” represents one operating expense category that the tenant is responsible for aside from their rent.
Operating expenses on commercial properties are broken out into three broad categories:
A tenant can take on one of these expenses, or all three.
Single net leases are those where the tenant takes on one of the above expenses on top of rent.
A double net lease is one where the tenant takes on two of the above expenses.
Since there are only three overarching expense categories, a triple net lease implies that the tenant(s) is taking on all property operating expenses, and therefore puts the largest amount of responsibility on the tenant.
Triple Net Lease Pros and Cons
From an ownership standpoint, a NNN lease is obviously beneficial. It helps protect them from incurring any unexpected or inconsistent costs over time. It creates a more steady, stable flow of income for them.
But, why might a tenant take on such responsibility?
From a tenant standpoint, a triple net lease allows you to take control of a property without owning it.
For example, consider a McDonald’s or Dunkin’ Donuts franchise…
Meeting a certain aesthetic is important for each and every location for these franchises. That said, Dunkin’ Donuts or McDonald’s tenants may want control over the properties they operate out of.
Secondly, NNN leases typically grant lower rent rates for tenants since they’re taking on extra cost.
The cons for tenants are pretty straightforward, and are essentially the contrary to how the leases benefit owners.
First of all, tenants are taking on more expenses, more management, and much more responsibility with a NNN lease. Furthermore, they lose the income stability that owners are gaining.
Instead of simply making a monthly rent payment, they might get hit with inconsistent, unexpected costs from time to time, as they’re now taking on the responsibility of weather damage and other repairs.
What commercial property types will use NNN leases?
While not exclusive to these asset types, triple net leases will mostly be used with single-tenant freestanding commercial buildings or retail properties (which may have one or multiple tenants).
More specific examples of typical triple net lease asset types include office buildings, industrial parks, shopping malls, bank buildings, pharmacies, and restaurants.
How to Find NNN Properties for Sale
There are many sources that you can use to find NNN properties for sale.
While some listings platforms let you search specifically for properties with net leases, at the least, many platforms allow you to search for the property types likely to have NNN leases.
With a Reonomy property search, you can search by asset class, tenant type, and tenant name, to find ideal NNN investment properties in any market nationwide.
Reonomy Property and Tenant Search
There are five noteworthy tabs to consider if you’re using Reonomy to search and find NNN properties.
First and foremost, the Tenant tab is where you can add in filters to search for specific tenant types and tenant names.
Tenant type examples could be NAICS or SIC identifiers like “Full Service Restaurants,” or can be custom entries, such as simply entering “restaurant.”
Tenant names, of course, would be the business or franchise name of the tenant in any specific property. If you’d like to search specifically for a McDonald’s, CVS, Dollar Tree, or anything alike, you can input that into the Tenant search bar.
You can also analyze any property you come across to see who the current tenants are (without having searched for specific tenants).
Alongside your tenant search, you can add a number of other filters that’ll help you narrow down your search to an exact location, or to a list of preferable locations.
The Asset Type tab lets you choose the type of property you’re looking for. This includes office buildings, retail, industrial, as well as many sub-classes of each.
The Location tab is exactly what it sounds like, and lets you search for your preferred asset type within a specific state, city, MSA, county, zip code, neighborhood, on a specific street, or at an exact address.
The Building and Lot tab allows you to hone in on properties with a specific physical makeup. Add filters for building and lot size, the year a building was built, number of units, and whether or not the property sits within an Opportunity Zone.
Reonomy allows you to search off-market, meaning properties may not be actively marketed as for sale. The Sales tab is where you can identify whether the owner of a NNN property is likely to sell.
Add filters for most recent sales date to see properties that have not sold in 7 or more years, and are therefore more likely to sell.
From there, you can also use Reonomy to find property owner contact information on the properties you’ve found in your property search and reach out to the owners or tenants directly.
Examples of NNN Property Searches on Reonomy
Aside from our rough McDonald’s/Dunkin’ Donuts example from above, there are a number of ways that you can approach finding your next NNN property investment on Reonomy.
CVS NNN for Sale
Perhaps you want to invest only in CVS locations in the Northeast. In this case, you can start in the Tenant tab, and in the Tenant search bar, enter “CVS.”
From there, you can roam the map freely, or add a specific location filter in to dive into individual CVS properties.
NNN Properties for Sale in California
Let’s say you’re looking more broadly. Maybe you’re not looking for a specific franchise but have a strict geographic focus.
In that case, you can start by adding a California location filter—let’s say you focus only on the Oakland commercial market.
For that, you can first add location filters to search Oakland with varying levels of granularity. For example, you can search only within the neighborhood of West Oakland.
From there, you have a few options.
You can continue searching, and either search for free-standing asset types, or for specific, NNN-related tenant types like “restaurants,” “pharmacies,” and “department stores.”
You might also prefer to simply dive into individual properties
You can even search for NNN properties likely to sell within Opportunity Zones for optimal investment potential.
NNN Retail Properties for Sale
Another broad example could be if you are looking for retail properties, but not necessarily in an individual market, and not for a specific franchise.
In this case, you can use the Asset Type tab in Reonomy to search for retail classified properties, as well as any sub-classes that might apply (convenience stores, department stores, car wash, shopping center, or restaurants).
Without using sub-classes, you could also utilize a tenant search to get more granular in finding specific franchises or franchise types.
Aside from Reonomy, you can also turn a number of active for sale listings sites for commercial properties.
With LoopNet, you can search for property types like office, retail, and shopping centers. To get more granular, however, you can search specifically for businesses for sale and whether a property is single or multi-tenancy.
Most importantly, LoopNet includes a filter to search only for net-leased properties.
CREXi is another nationwide listings platform that lets you search specifically for NNN properties for sale.
When adding filters to your CREXi property search, there are a number of lease-related specifications. On their platform, NNN properties are referred to as “Absolute Net” properties—simply another synonym for NNN.
You can use the platform to search only for NNN properties for sale, or for all kinds of net-leased properties. You can also add filters for tenancy, and tenant credit—for example, whether or not the property is a franchise or not.
When searching for commercial properties on Ten-X, you can very easily search only for net-lease and NNN properties for sale—all you need to do is click their readily available “Net Lease” button at the top of the page.
You can also search Ten-X NNN properties for sale by number of units and net rentable area (in square feet).
Marcus and Millichap
You can also turn to advisory teams when looking for NNN properties for sale. One great example is Marcus and Millichap, one of the nation’s largest brokerage firms.
The company serves investors looking to buy commercial properties in the U.S. and Canada, but has a special advisory group that focuses only on net leased properties.
Marcus and Millichap’s Net Leased Properties Group (NLPG) provides advisory and transaction services for single-tenant net leased commercial properties.
No matter what kind of NNN property you might be looking to find, Reonomy presents the malleability and diversity in searching them, plus a bevy of insights on individual properties, owners, and tenants.