The tenant pays taxes, insurance, and maintenance — the landlord just owns the dirt.
A triple net (NNN) lease is a commercial real estate lease where the tenant pays — in addition to base rent — the property's three main operating expenses: property taxes, insurance, and maintenance. The "triple net" name refers to those three expense categories being passed through to the tenant rather than absorbed by the landlord.
NNN is the most passive form of commercial real estate ownership. The landlord owns the property and collects rent; the tenant pays virtually every operating expense and handles property management themselves. The landlord's actual workload is minimal: collect the rent check, ensure compliance with the lease, and otherwise stay out of the way. This makes NNN attractive to investors who want CRE income without operational complexity.
NNN leases are typically long-term (10–25 years), investment-grade-tenant-credit (national chains like Walgreens, Dollar General, Starbucks, Chick-fil-A), and fixed escalator (annual rent increases of 1.5–2.5% or bumps at 5-year intervals). The combination of long lease terms with credit tenants makes NNN income highly predictable — the closest thing in real estate to a bond.
NNN cap rates reflect tenant credit and lease term remaining. Best-in-class tenants (Walgreens, CVS, FedEx) with 15+ years remaining trade at 5.5–6.5% cap rates. Mid-tier tenants (Dollar General, AutoZone) trade at 6.5–7.5%. Lower-credit or shorter-term deals trade at 7.5–9%+. The risk is concentration — when a single tenant fails on a single-tenant net lease, the building's income goes from 100% to 0% in a day.
NNN is increasingly popular with 1031 exchange buyers because it lets investors move out of management-intensive multifamily into truly passive income while preserving tax-deferred capital. The trade-off: NNN typically appreciates less than multifamily (no operational lift available) and has higher residual value risk (when the lease ends, the property may need to be re-leased or repositioned).
| Property: Dollar General, 9,200 sqft | |
| Lease: 15-year primary term, 5×5 yr options | |
| Base rent (year 1) | $135,000 |
| Annual escalator | 1.5% |
| Landlord expenses | ~$0 (tenant pays all) |
| Landlord NOI | $135,000 |
| Cap rate | 7.25% |
| Property value | $1,862,069 |
| Annual operational workload | Minimal — collect rent, monitor lease compliance |
A lease structure where the tenant pays — in addition to base rent — the three main operating expenses of the property: property taxes, insurance, and maintenance (the "three nets").
Almost — absolute net is even more landlord-friendly, with the tenant responsible for all expenses including capital improvements like roof replacement and structural repairs. True triple net usually leaves some structural / capex responsibility with the landlord.
Typically yes — NNN trades at 50–150 bps tighter than equivalent multi-tenant retail because of credit tenant strength, long lease terms, and the truly passive nature of the income.
Tenant default or non-renewal — if the single tenant fails or walks away at lease end, the building goes from 100% occupied to 100% vacant in a day, with no income and high re-leasing costs.
Yes — NNN is one of the most popular landing spots for 1031 exchange buyers because it preserves tax-deferred capital while shifting to truly passive ownership.
Matrix structures CMBS, life-company, and bridge debt on net-leased commercial properties — sized to the credit, the term, and the location.
