What is NNN, NN, N lease? How do they differ from Gross Lease...

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Real Estate Agent with Berkshire Hathaway HomeServices 01238708
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What is NNN , NN, N lease? How do they differ from a Gross Lease?

www.endrebarath.com

Having International clients who were not familiar with the terminology of NNN (Net-Net-Net) lease prompted me to write a blog post to explain the differences between commercial leases. I could write a chapter not a blog post on each of these different lease types. Hence here is the abbreviated version:

Triple Net Lease , this type of lease clearly favors the Investor who does not like high risk , because the ‘Tenant’ has signed a long-term lease that could be ten or more years . The typical tenant is either leases an office building,  or a top of the line Shopping Center as an example. Customarily is  responsible for paying for, the taxes, insurance as well as the upkeep of the building. At the same time rent increases have been negotiated or should I say built into the contract.

So, how does this favor the Tenant? Since the Tenant is paying the costs that are customarily a Landlord’s responsibility, the rent charged is substantially lower than the going rate for similar properties. This is calculated in, to compensate for the Tenant handling the costs of the Building Insurance, the Building & Ground Maintenance Upkeep as well as the Taxes.

Now there is alternatively  Net Lease and a Double Net Lease, the difference is, that in a Net Lease the Tenant Pays the Taxes in addition to the rent . Now in a double  Net Lease the Tenant pays the Taxes and the Insurance as well. Neither case do they pay the Maintenance of the Building.

There are pros and cons to each of these types of lease, hence depending on the situation of the Tenant one has to consider what is more important and what is their risk tolerance. For example, cities and states tend to raise taxes on a consistent basis. There is also a concern of Insurance Carriers raising their fees as well.

www.endrebarath.com

So now the question is what is the alternative to these Leases? The answer is easy it is called a Gross Lease! Totally the opposite, nothing is paid by the tenant outside of the monthly lease and needless to say at a Premium!

Now if you are looking to Lease or Buy a Commercial Property please reach out to me directly!

 

 

If you are looking for a knowledgeable, focused and goal-oriented Realtor in the Beverly Hills area who will help you achieve your Real Estate goals, please reach out to me directly!

If you are looking for a pet friendly Beverly Hills Realtor who can handle and sell the most difficult properties that no one else could, please reach out to me directly!! If you are considering buying or selling a home, a luxury home, luxury investment real estate, luxury vacation homes, or luxury beach properties in Southern California, Los Angeles, Century City, Westwood, West Hollywood, Beverly Hills, Marina Del Rey, Venice or Malibu, feel free to contact me at 310.486.1002 (m) or homes@endrebarath.com or visit one of my websites at https://www.endrebarath.com  I contribute a portion of my commission to local animal rescue organizations.

 

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Rainmaker
1,928,462
Patricia Feager, MBA, CRS, GRI,MRP
DFW FINE PROPERTIES - Southlake, TX
Selling Homes Changing Lives

Endre Barath, Jr. - This is excellent information that you provided. Agents who only sell residential property should not even attempt to do what you do and should refer the business to you. 

Mar 17, 2019 02:19 AM #1
Rainmaker
2,771,818
James Dray
Fathom Realty AR LLC - Bentonville, AR
Exceptional Agents, Outstanding Results

Morning Endre.

I have two agents who are totally familiar with commercial properties.  For me, I won't go anywhere near them.  I know my limitations 

Mar 17, 2019 02:56 AM #2
Rainmaker
3,087,286
Lawrence "Larry" & Sheila Agranoff. Cell: 631-805-4400
The Top Team @ Charles Rutenberg Realty 255 Executive Dr, Plainview NY 11803 - Plainview, NY
Long Island Home and Condo Specialists

Commerical Real Estate is not the same and buyers need to work with an experienced Realtor who knows this market...That would be you Endre in L.A.!

Mar 17, 2019 04:26 AM #3
Rainmaker
3,095,283
Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

Good morning Endre. A great synopsis for those with little exposure to commercial leasing. Enjoy your day!

Mar 17, 2019 05:10 AM #4
Rainmaker
3,735,345
Dorie Dillard CRS GRI ABR
Coldwell Banker United Realtors® ~ 512.750.6899 - Austin, TX
Serving Buyers & Sellers in NW Austin Real Estate

Good morning Endre Barath, Jr. ,

What an excellent post! I have no experience with commercial real estate and leasing. I always refer it out and you just re-enforced why I do!!

Mar 17, 2019 06:20 AM #5
Ambassador
1,770,490
Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

I remember this from some initial testing for licensing, but since we stick to residential - I'd forgotton all about these various forms of leasing.  We also refer out commericial deals to the folks who do it best - like you. 

Mar 17, 2019 06:53 AM #6
Rainmaker
3,180,369
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hello Endre - an excellent post as an introduction or reminder for those who don't have much leasing experience beyond residential. Having an expert in the field matters.  A lot.

Mar 17, 2019 07:23 AM #7
Rainmaker
4,230,739
Ron and Alexandra Seigel
Napa Consultants - Carpinteria, CA
Luxury Real Estate Branding, Marketing & Strategy

Endre,

Are you getting into commercial real estate?  I liked the modified NNN lease.  The landlord pays for the mechanical and the roof, the big stuff. The true triple net is where the tenant pays for everything. I prefer it to the gross lease because you are not paying for fictional space for a percentage of common area.    There is a building in Santa Monica where the common area is 18% of whatever amount of space you are renting.  That is hideously high!. Also when they remodel the office building or sell it, the taxes and the remodeling get added to the gross, and the numbers are gross.  One of our former commercial real estate clients has an incredible gross that makes his rent untenable.  He will be moving soon.  Luckily, he does very well and can afford it.  A

Mar 17, 2019 08:08 AM #8
Rainmaker
1,248,316
Carol Williams
Although I'm retired, I love sharing my knowledge and learning from other real estate industry professionals. - Wenatchee, WA
Retired Agent / Broker / Property Manager

Hi Endre,
Great info.  Each lease has it's pros and cons for the tenant and investor, doesn't it?  It's a matter of finding common ground.

Mar 17, 2019 08:57 AM #9
Ambassador
3,105,066
Debe Maxwell, CRS
www.iCharlotteHomes.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
Charlotte Homes for Sale - Charlotte Neighborhoods

Very interesting, Endre! I had no clue whatsoever about this - definitely not in my wheelhouse!

Mar 17, 2019 09:04 PM #10
Rainmaker
3,119,360
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Patricia Feager, MBA, CRS, GRI,MRP  I have been involved with Commercial Lease and Sales for over a decade, hence not wanting to sound knowledgeable never the less I learned a lot hence now days other agents come to me to either refer business or partner with me, Endre

p.s.:        @krista jenkins tried pinking you but to no avail.. I agree with you wen it comes to Land Representations.... now with that said I just work more patiently....Endre

 

 

Mar 17, 2019 10:27 PM #11
Rainmaker
3,119,360
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

James Dray  commercial there are many facets to it, I will not do Restaurants, Hospitals and the list goes on and on, Endre

Mar 17, 2019 10:28 PM #12
Rainmaker
3,119,360
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Lawrence "Larry" & Sheila Agranoff. Cell: 631-805-4400  thank you and in many instances I have to decline and refer to experienced agents, Endre

Mar 17, 2019 10:29 PM #13
Rainmaker
3,119,360
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Dorie Dillard CRS GRI ABR  we need to know what we do and what we do not know, Endre

Mar 17, 2019 10:30 PM #14
Rainmaker
3,119,360
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Debb Janes EcoBroker and Bernie Stea JD  a few years ago I was inundated with Restaurant buyers.... I had to pass them on to agents who actually understood the Restaurant Business, would not dare to take on the liability, still do not, Endre

Mar 17, 2019 10:31 PM #15
Rainmaker
3,119,360
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Michael Jacobs  I had to smile when I explained to my client that $350k is just the entry threshold and then all the other costs are on top:)Endre

Mar 17, 2019 10:33 PM #16
Rainmaker
3,119,360
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Ron and Alexandra Seigel  I have been in it for a while due to my land expertise, and it has been morphing out to other areas, but I am trying to limit it what I know, vs what some of the clients are looking.... still love to refer it out when I am over my head...Endre

Mar 17, 2019 10:34 PM #17
Rainmaker
3,119,360
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Carol Williams  yes you have to find out what the potential tenant is more comfortable with and then it works for everyone, Endre

Mar 17, 2019 10:36 PM #18
Rainmaker
3,119,360
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Debe Maxwell, CRS  it is always good to get "new or old information refreshed" Endre

Mar 17, 2019 10:36 PM #19
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