Triple net investments involve purchasing a free-standing building where the tenants pay rent to the landlord in addition to their proportionate share of the property taxes, insurance and common area maintenance, CAM. Some triple net properties are single tenant buildings, and some are multi-tenant buildings.
Triple net refers to the type of leases that are in place. The triple nets are a figured by combining the cost of the property taxes, property insurance and annual common area maintenance. This total number is divided by the total number of square feet the property contains. This triple net amount is charged to the tenant based on how many square feet they occupy, and this amount is paid on top of the base rent.
There are some investment properties where the leases are structured differently but triple net investments are the most desirable for investors because there are fewer landlord responsibilities. When a triple net investment is fully leased, the tenant or tenants are covering all the property expenses for taxes, property insurance and CAM.
In most cases the triple net expenses are reconciled annually and adjusted based on the actual expenses. This ensures that the tenants continue to cover the entire cost of the property taxes, insurance and common area maintenance associated with the property.