18. What is a net leased property?
- A net lease contains provisions that all operating expenses, maintenance, utilities, insurance and taxes are to be paid by the tenant. The net lease relieves the owner/ landlord of the managerial burdens, which are shifted to the tenant. A triple-net leased property is an investment where one owns real estate (land and or building), leased to a tenant who agrees to occupy the property, operate their business on the premises, pay rent and all of operating expenses related to the property (real estate taxes, maintenance, insurance, etc.). Investors who seek predictable, partially tax-sheltered income secured by the credit worthiness of the tenant, should consider buying commercial single-tenant triple net properties. These properties can be office, retail, industrial, warehouse, residential, medical, agricultural or even land. Many 1031 investors sell management intensive properties such as apartment complexes or office buildings, hoping to find management-free properties producing long-term predictable cash flow.