In this guide
- What a triple net lease actually is
- The lease ladder: gross → NN → NNN → absolute
- Why investors love it (the true half of the pitch)
- The audit: what they don't tell you
- Credit is the whole game
- The year-14 problem: expiry and the dark store
- The numbers: prices, cap rates, bumps
- NNN in a 1031 exchange
- NNN vs. DST: the passive fork
- Frequently asked questions
What a triple net lease actually is
The three “nets” are the three expense categories the tenant assumes beyond rent: property taxes, building insurance, and maintenance. Add them to a base rent and the landlord's operating statement nearly empties — no expense reconciliations, no management fee, no surprise HVAC bill. The structure dominates freestanding, single-tenant buildings occupied by national operators — pharmacies, quick-service restaurants, convenience and dollar stores, auto parts, urgent care — on initial terms of 10–25 years with renewal options and scheduled rent escalations. The tenant effectively controls the building as if it owned it; the landlord holds a deed and an income stream. That's the design, and within its limits it works exactly as advertised — the rest of this page is about the limits.
The lease ladder: gross → NN → NNN → absolute
| Lease type | Tenant pays | Landlord keeps |
|---|---|---|
| Gross / full-service | Rent only | All operating expenses |
| NN (double net) | Rent + taxes + insurance | Maintenance, roof, structure |
| NNN (triple net) | Rent + taxes + insurance + maintenance | Commonly roof & structure, plus anything the lease excludes |
| Absolute net (“bondable”) | Everything — including roof, structure, even casualty/condemnation risk | Essentially nothing but the mortgage |
The industry's dirty secret is terminological: listings say “NNN” for anything to the right of gross, and the difference between a true absolute-net drugstore and a “NNN” deal where the landlord owns a 19-year-old roof is tens of thousands of dollars and one paragraph of lease language. The lease document is the investment; everything else is a photograph of it.
Why investors love it (the true half of the pitch)
Judged on what it claims, NNN delivers: predictable income contractually escalated for a decade-plus; minimal operations — genuinely hours per year on a well-structured deal; financeable cash flows lenders price like credit instruments; estate-friendly simplicity; and — the reason it anchors this site — full §1031 eligibility, making it the standard landing spot for exchangers leaving management-heavy property for the passive end of the spectrum without surrendering the deed. The Reddit-thread summary — “like buying a long-duration corporate bond where you know exactly what you'll get” — is right, provided you extend the analogy honestly: bonds have credit risk, duration risk, and a maturity date. So does this.
The audit: what they don't tell you
Five omissions recur in NNN marketing. (1) The landlord's residual expenses: roof and structure in most true-NNN leases, plus releasing commissions, legal, downtime, and capital items the lease carves out. (2) Inflation lag: 1–2% annual bumps (or 10% per five years) trail real inflation in hot stretches — the income is nominal-fixed in a way a building with market-rate rollovers isn't. (3) Rate sensitivity: long flat leases price like duration; when rates rise, cap rates follow and values fall with no operational lever to pull. (4) Binary concentration: one tenant is 100% of income — there is no 92% occupancy in a single-tenant building. (5) The exit assumption: your buyer years from now is buying remaining lease term — a 15-year lease with 6 years left is a different, cheaper product than the one you bought. None of these kill the category; all of them belong in the price you pay, which is what the next two sections underwrite.
Credit is the whole game
Strip the real estate away and an NNN purchase is a loan to the tenant, secured by a building. So underwrite it like a lender: who actually signs the lease? A corporate guarantee from an investment-grade parent (the drugstore chains, the major QSR parents on company-operated stores) is the real thing; a franchisee LLC operating three locations is small-business credit wearing a national logo — routinely priced 100+ basis points wider for exactly that reason. Check the guarantor's rating and financials, whether the guarantee survives assignment, store-level sales where obtainable (a tenant's weakest units close first, lease or no lease), and the operator's closure history as a chain. The 2017–2020 retail shakeouts and the drugstore-chain store-closing waves since taught the same lesson at scale: the lease is a promise, and promises are worth the promisor. Location quality is the underwriting's second chapter for one reason — it's what you own when the promise ends.
The year-14 problem: expiry and the dark store
Every net-lease investment ends the same way: the term runs out, and the “bond” becomes a building again. The renewal decision belongs entirely to the tenant, made on store economics you partially can't see — and purpose-built boxes (the drive-thru layout, the pharmacy floor plate) re-tenant hard and expensively when the answer is no. A dark store — vacant, purpose-built, in a market the tenant just told you it doesn't want — can be worth a fraction of its leased value. The discipline this forces: underwrite the dirt — buy corners and corridors that work for the next tenant at sensible rent; price remaining term, not original term; enter with a horizon that exits or re-signs well before the cliff; and treat below-market rent as hidden safety (the tenant renews) while above-market rent is hidden risk (they won't). The full underwriting checklist turns this section into line items; the one-sentence version: never pay a bond price for the years after the bond matures.
The numbers: prices, cap rates, bumps
The single-tenant net-lease market trades roughly from $1M to $10M+ per property, its liquid center at $1.5–$5M — accessible to individual exchangers in a way institutional CRE isn't. Cap rates have generally run ~5.5–7.5% in recent years: tightest for long-term absolute-net deals with investment-grade credit (and ground leases tighter still), widening with shorter term, franchisee credit, or weaker corners. Escalations of 1–2%/year or ~10% per option period are standard. Leverage math matters more than usual: with flat-ish income, your spread over debt cost is the return, so the rate environment at purchase largely sets the deal — another way NNN behaves like the bond it resembles. Verify current comps deal-by-deal; this market reprices with Treasuries, and any static number (including these) ages.
NNN in a 1031 exchange
NNN property and the exchange were made for each other, and the fit is mechanical, not just thematic: like-kind eligibility is unquestioned; marketed net-lease inventory is listed and closes reliably inside the 180-day window; conventional financing supports the debt-matching a full deferral requires; and price points let a large sale identify two or three properties across tenants and geographies — diversifying the binary risk above. The classic move this site's readers make: sell the management-intensive multifamily, exchange into one or two NNN assets, and convert a job into a deposit — keeping every option (refinance, sale, future exchange) a fully passive vehicle would close.
NNN vs. DST: the passive fork
The last decision is the fork from the pillar guide, run at the passive end: NNN keeps the deed, the control, the refinance, and the exit timing, at the price of one-tenant concentration, ~$1M practical minimums, and those few residual hours; a DST delivers true zero-touch ownership, institutional diversification, and exact-dollar sizing, at the price of the fee load, illiquidity, and the sponsor's clock. Many exchangers split the difference literally — an NNN asset for control plus a DST for the remainder — which the identification rules accommodate in one exchange. Either way, the discipline that carried this whole page carries the decision: read the lease, underwrite the credit, price the cliff — and let the “passive” be something you verified rather than something you were sold.