You must be aware of the benefits of 1031 Exchange NNN investments. There are numerous ways to structure a lease agreement, such as Gross Lease, Net Lease, NN Lease, NNN Lease, Absolute Lease, or Bond Lease. Here, in this blog, we will explain all the differences between these common lease structures.
At a basic level, the names of these lease structures define the terms of the leases. A gross lease requires a rent from the tenant that will cover gross, or all operating expenses the landlord realizes on the property like real estate expenses, maintenance costs, and property insurance fees. A net lease, in contrast, requires a rent payment that will cover the operating expenses net or excluding certain expenses. The more “nets” in the contract or lease, the fewer property expenses the rent installment is going to cover. Let's dive into a more in-depth explanation of every lease structures and show you why 1031 Exchange NNN investments are well known among real estate investors.
Gross Lease:
These are a common residential lease structure. Under this, the tenant pays the rent of the property. Here, the landlord is responsible for paying the property insurance fees, estate taxes, and property maintenance expenses. Add paragraph text here.
Net Lease (Single Net Lease):
This lease allows the tenant to pay rent in addition to utility costs, real estate taxes, or property insurance. The landlord is responsible for paying all the maintenance and expenses not covered by the tenant.
Net Net Lease (Double Net Lease, NN Lease):
The tenant is liable for paying the rent and all the property's operating expenses that exclude the aspects of property maintenance, especially of common areas, rooftop, and the base structure. The landlord maintains liability of the property and is liable for areas of maintenance that is not covered by the tenant.
Net Net Net Lease (NNN Lease, Triple Net Lease):
Under the NNN lease, the tenant is liable for paying rent and all operating expenses, including structural maintenance. The landlord bears the responsibility in the case of any casualty or condemnation if the property gets destroyed.
Absolute NNN Lease (Bond Lease):
Under this lease, the tenant is liable for paying rent and all operating expenses, even in the unlikely event of a casualty.
When there are fewer “nets” in the rent agreement, the investor takes on less risk and obligation for the property. The landlord seeks high rent from the tenant and addresses a greater amount of maintenance issues. The landlord maintains control over the property’s utilization and upkeep. With the increase in the “nets”, tenants take more responsibility for the property and gain control of the upkeep and the property costs. As they pay taxes, insurance fees, or utility costs, tenants are less likely to be cheated for these costs when they are evaluated into a standard lease rate.Add paragraph text here.
