A [triple net lease](/glossary/triple-net-lease) is a commercial real estate lease structure where the tenant pays the three major operating expenses on top of base rent: property taxes, building insurance, and maintenance costs. The landlord collects rent with minimal ongoing obligations. For investors, this creates a predictable income stream that behaves more like a bond than a traditional rental property.
The "triple net" in the name refers to those three expense categories. You may see it abbreviated as NNN, which is industry shorthand used in listings, broker materials, and investor discussions. The structure is most common in single-tenant commercial properties - freestanding retail, medical offices, industrial buildings, and other commercial assets leased to a single occupant.
How a Triple Net Lease Works
In a standard commercial lease, the landlord collects rent and then pays operating expenses out of that revenue. Vacancies, tax increases, and surprise maintenance costs all eat into returns. A triple net lease flips this model.
Under an NNN lease, the tenant is contractually responsible for:
- Property taxes - The tenant pays the full annual tax bill directly to the taxing authority or reimburses the landlord
- Building insurance - The tenant carries and pays for the property's casualty and liability insurance
- Common area maintenance (CAM) - The tenant covers routine upkeep, landscaping, parking lot repairs, and sometimes structural maintenance
A practical example: An investor purchases a Walgreens-occupied freestanding building for $3.2M. The NNN lease calls for $192,000 in annual base rent (a 6.0% [cap rate](/glossary/cap-rate)). Walgreens pays the $38,000 annual property taxes, $8,500 insurance premium, and all maintenance costs directly. The investor's net income is the full $192,000 minus only their debt service and any asset management fees.
Types of Net Lease Structures
Not all net leases are the same. The amount of expense responsibility transferred to the tenant varies:
Single Net Lease (N) - The tenant pays base rent plus property taxes only. The landlord still covers insurance and maintenance. Less common in today's market.
Double Net Lease (NN) - The tenant pays base rent plus property taxes and insurance. The landlord retains maintenance responsibility. Common in multi-tenant retail centers.
Triple Net Lease (NNN) - The tenant pays base rent plus all three expense categories: taxes, insurance, and maintenance. This is the standard for single-tenant investment properties.
Absolute Triple Net Lease - The most landlord-favorable structure. The tenant is responsible for every conceivable expense, including roof replacement, structural repairs, and even rebuilding after a casualty event. Common with investment-grade tenants like Dollar General, CVS, and Starbucks.
Bondable / Hell-or-High-Water Lease - A subset of absolute NNN where the tenant's obligations continue regardless of any event, including condemnation or destruction. These leases are essentially corporate bonds secured by real estate.
The distinction matters for valuation. An absolute NNN lease on a credit tenant commands a lower cap rate (higher price) than a standard NNN lease where the landlord retains some roof and structure risk.
Why Investors Choose NNN Properties
Triple net properties attract a specific type of investor - typically someone who values predictable cash flow and minimal management over value-add upside. The appeal breaks down into several factors:
Predictable income. With expenses passed through to the tenant, [net operating income](/glossary/net-operating-income) equals base rent. There are no surprise maintenance bills, no property tax reassessment shocks, and no insurance premium spikes eating into returns. Cash flow forecasting becomes straightforward.
Minimal management. Most NNN investors never visit their properties. The tenant handles everything from mowing the lawn to replacing the HVAC system. This makes NNN leases attractive to passive investors, retirees, and anyone who does not want to be a hands-on landlord.
Built-in rent growth. NNN leases typically include rent escalation clauses - either fixed annual increases (commonly 1.5-2.5%) or periodic bumps tied to CPI. Over a 15-year lease term, these escalators compound meaningfully. A $200,000 annual rent with 2% escalators grows to $269,000 by year 15.
Tenant credit quality. Many NNN tenants are publicly traded companies or national chains with investment-grade credit ratings. When Walgreens, FedEx, or Dollar General signs a 15-year lease, the rent obligation is backed by a multi-billion-dollar corporate balance sheet. This is fundamentally different from collecting rent from a local business with no credit depth.
[1031 exchange](/glossary/1031-exchange) suitability. NNN properties are among the most popular vehicles for 1031 exchanges because they allow investors to defer capital gains while moving into a truly passive asset. An investor selling an apartment complex can exchange into a credit-tenant NNN and eliminate management headaches entirely.
Common NNN Tenants and Sectors
Triple net leases are concentrated in sectors where national tenants operate freestanding locations:
Retail - Drug stores (CVS, Walgreens), dollar stores (Dollar General, Dollar Tree), auto parts (O'Reilly, AutoZone), quick-service restaurants (Chick-fil-A, McDonald's), convenience stores (7-Eleven, Wawa)
Medical Office - Dialysis centers (DaVita, Fresenius), urgent care facilities, dental chains, veterinary clinics. Medical tenants often sign longer leases and invest heavily in tenant improvements.
Industrial - Distribution centers, last-mile logistics facilities, light manufacturing. Amazon, FedEx, and UPS lease thousands of NNN industrial properties.
Self-Storage - Facilities operated by Public Storage, Extra Space Storage, and CubeSmart typically operate under NNN or modified NNN structures.
Automotive - Tire and lube centers (Jiffy Lube, Valvoline), car washes, auto dealerships.
Tenant quality varies enormously. An absolute NNN lease with Dollar General (S&P: BBB) trades at a 6.0-6.5% cap rate. A similar property leased to a regional restaurant chain with no credit rating might trade at 7.5-8.5%. The [cap rate spread](/calculators/cap-rate-spread) between credit and non-credit tenants reflects the risk difference.
How to Evaluate an NNN Deal
Analyzing a triple net property differs from evaluating a multi-tenant building or a value-add deal. The key variables:
Cap rate and price. The [cap rate](/calculators/cap-rate) measures your unlevered yield. Divide annual net rent by the purchase price. A $3M property with $180K in annual NNN rent yields a 6.0% cap rate. Compare this against current Treasury rates and sector benchmarks to assess relative value. Use the [cap rate spread to 10-Year Treasury](/benchmarks/spread-to-10y) as a baseline.
Tenant creditworthiness. Research the tenant's financial health. Public companies have audited financials, credit ratings, and earnings reports. Private tenants require more diligence - request financials, review their operating history, and assess their industry position. A long lease means nothing if the tenant files for bankruptcy in year three.
Lease term remaining. A 15-year NNN lease on a credit tenant is a very different asset than the same property with three years remaining. Shorter lease terms introduce re-tenanting risk and typically command higher cap rates (lower prices). The market generally prices a meaningful discount once lease term drops below seven years.
Rent escalation structure. Fixed annual increases (1.5-2.5%) are most common and most predictable. CPI-linked escalators provide inflation protection but introduce variability. Flat leases with no escalators are the least favorable for investors - your real return erodes every year.
Location quality. Even with a corporate guarantee backing the lease, location matters for your exit. A Walgreens on a high-traffic corner with strong demographics will re-lease or sell far more easily than the same tenant on a secondary road in a declining market. Location drives residual value.
Roof, structure, and environmental. Understand exactly which maintenance obligations transfer to the tenant. Standard NNN leases often leave roof and structural repairs with the landlord. Absolute NNN leases transfer everything. This distinction can mean $50,000-$150,000 in unexpected capital expenditures over a 10-year hold if you are not clear on the lease language.
NNN Cap Rates and Market Pricing
NNN cap rates fluctuate with interest rates, tenant credit quality, lease term, and property location. As a general framework for early 2026:
- Investment-grade retail (Dollar General, Walgreens, CVS): 5.5-6.5%
- Quick-service restaurants (Chick-fil-A, Starbucks): 4.5-5.5%
- Medical office NNN: 5.5-6.5%
- Industrial NNN: 5.0-6.0%
- Non-credit or short-term NNN: 7.0-9.0%
The spread between NNN cap rates and the 10-Year Treasury yield is the key metric for assessing whether the market is cheap or expensive. Historically, NNN cap rates have traded 250-400 basis points above the 10-Year. When the spread compresses below 200 bps, the market is pricing in significant risk reduction or rent growth expectations.
Risks of NNN Investing
NNN leases are not risk-free. The main risks:
Tenant default or bankruptcy. If your single tenant stops paying, your income drops to zero. There is no diversification across multiple tenants. This is why credit quality and lease guarantees matter so much. Investors should monitor tenant health through our [tenant risk tools](/tenant-risk).
Interest rate sensitivity. NNN properties are priced like bonds. When rates rise, cap rates expand and property values fall. A property purchased at a 5.5% cap rate in a low-rate environment might only sell at a 6.5% cap rate two years later - a significant loss of principal even if rental income is unchanged.
Re-tenanting risk. Purpose-built properties (drive-through restaurants, auto service centers, bank branches) can be difficult and expensive to re-tenant if the original occupant leaves. The specialized layout may not suit other users without significant renovation.
Inflation erosion. If rent escalators don't keep pace with inflation, your real return declines over time. A 1.5% annual escalator in a 4% inflation environment means you're losing purchasing power each year.
Getting Started with NNN Investing
For individual investors exploring NNN properties for the first time, our [getting started guide](/small-investor/getting-started) covers the practical steps: how much capital you need, financing options, and where to find deals. Current NNN deal listings are available on our [deals page](/deals).
Use the [cap rate calculator](/calculators/cap-rate) to analyze potential acquisitions, the [DSCR calculator](/calculators/dscr) to stress-test financing scenarios, and the [loan payment calculator](/calculators/loan-payment) to model debt service. For investors considering a [1031 exchange](/strategy/1031) into an NNN property, the tax deferral benefits can be substantial.
The NNN market rewards patient, informed buyers who understand lease structures, tenant credit, and market pricing. The information advantage is real - and it is the reason this platform exists.