What Is a Triple Net Lease? NNN Investing Explained

Lease basics

What is a triple net lease?

A triple net lease (NNN) is a commercial lease in which the tenant pays base rent plus real estate taxes, building insurance and maintenance. Those are the property's three main operating costs. Because the tenant carries those costs, the rent the landlord collects is close to the property's net income. That is why investors call this "net lease" real estate.

NNN REIT, Inc. is a listed real estate investment trust (REIT) whose largest tenant groups are automotive service, convenience stores and restaurants. Its annual report for 2025 puts it this way: "the tenant bears responsibility for operating expenses of the Property, including utilities."

Much triple net property is single-tenant: a drugstore, a fast-food restaurant, a dollar store, an auto service shop or a warehouse leased to one company. Where several tenants share a building, each pays its share of common area maintenance (CAM). Shopping centers built around a supermarket work differently, and the guide to grocery-anchored centers covers them.

Who pays what

NNN vs NN vs gross vs modified gross: who pays what?

Commercial lease types differ in which costs move from the landlord to the tenant. In a gross lease the landlord pays nearly everything, and in a triple net lease the tenant pays nearly everything.

Sources disagree at the edges. Two leases both called NNN can split roof, structure and parking-lot costs differently. The labels are shorthand, so find the clause that says who pays for what.

Full-service gross is the norm in Class A office buildings. A modified gross tenant pays base rent plus a negotiated share of some costs, often utilities or part of the taxes.

What is an absolute net lease?

An absolute net lease is the strictest form of triple net lease, in which the tenant also carries the roof and structure. In a true "bondable" lease, the tenant keeps paying rent after a casualty or condemnation, with no right to end the lease or reduce the rent.

Landlords usually get those terms only from large tenants with strong credit. No statute defines "absolute net," so the lease still needs a close read.

Term and escalators

How long are triple net leases, and how do rent increases work?

Triple net leases usually start at 10 to 20 years, with fixed-step rent increases or increases tied to the Consumer Price Index (CPI). NNN REIT, Inc. says that "in most cases" its leases "provide for initial terms of 10 to 20 years," mostly with CPI-linked increases. Its second-quarter 2026 purchases carried an average lease term of 17.9 years.

The years left matter more than the starting term. Public net lease REITs report that figure every quarter:

Those REITs report about 99% occupancy across thousands of buildings. A single-tenant building has no average: it is either 100% leased or empty.

Agree Realty counts rent as investment grade only when the tenant or its parent holds an investment grade rating. The rating must come from S&P Global Ratings, Moody's or Fitch. When a sponsor uses the label, ask which agency rates the tenant and at what grade. The guide to investment-grade tenant claims shows how to test it.

Credit and price

How does tenant credit set net lease cap rates?

Net lease buyers price a property mainly on how likely the tenant is to keep paying and how many years it has left. A lower cap rate means buyers pay more for each dollar of rent because they see less risk. A higher one is the market pricing in risk, not free yield.

Lease term moves the price almost as much as the tenant. Boulder shows Walgreens stores asking 6.85% with 15 to 19 years left but 9.30% with 5 years or less. On $400,000 of rent, that is about $5.84 million against $4.30 million, 26% less for the short lease.

Credit can also change mid-lease. After Sycamore Partners took Walgreens private on August 28, 2025, Northmarq reported Walgreens cap rates "moving into the 7s and higher in 2025."

Why did net lease cap rates rise in 2026?

Net lease cap rates rose in 2026 with long-term interest rates. Each source measures them differently, so compare each with its own history:

• The Boulder Group, asking prices, Q3 2026: 6.92% overall, "the highest level reached in over a decade." By sector: retail 6.69%, office 8.00%, industrial 7.28%.
• Northmarq, closed single-tenant retail sales, Q2 2026: 6.85%, from 6.40% in the West to 7.58% in the Midwest.
• CBRE, closed net lease sales, Q2 2026: 6.9% on average. That was 241 basis points over that quarter's 4.5% average 10-year Treasury yield.

The 10-year Treasury was 5.09% on October 16, 2026, about 1.8 points under Boulder's 6.92%. Boulder says permanent loans are now "generally priced above net lease cap rates in most instances." That is negative leverage: borrowing lowers the cash yield instead of raising it.

CPI-linked increases soften rate risk; flat leases do not. Warehouses price differently, as the industrial net lease guide shows.

When a tenant fails

What happens when a net lease tenant files for bankruptcy?

A net lease tenant in Chapter 11 must keep paying rent on a commercial lease while it decides whether to keep it. It has 120 days to decide, which a court can extend by 90 days, under 11 U.S.C. 365(d).

If the tenant rejects the lease, 11 U.S.C. 502(b)(6) caps the landlord's claim for future rent. The cap is the rent for the greater of one year or 15% of the remaining term, never more than three years, plus rent already unpaid.

A long lease is only as good as the tenant behind it. As Northmarq wrote about Walgreens in September 2025, "Even long leases once considered untouchable may come back to the table." A tenant can also "go dark," closing the store while it keeps paying until the lease runs out. A building designed for one use, like a drive-through restaurant, can be hard to re-lease.

Fit and trade-offs

Is a triple net lease a good investment?

A triple net lease suits investors who want predictable rent and few landlord duties. It puts the risk in one tenant, one building and the direction of interest rates. A deal is only as good as the price paid for the tenant's credit and the years left.

• For it: the tenant pays most operating costs, and terms often start at 10 to 20 years with built-in increases. Many national tenants carry public credit ratings.
• Against it: one departure takes rent from 100% to zero, and credit can weaken mid-lease. Bankruptcy caps the claim for future rent, and higher rates cut the value of long fixed-rent leases.

Net lease retail funds spread those risks across many tenants and markets. The trade-offs are fees, no say in which buildings you own and, in a private fund, money tied up for years.

Ways to own

Should you own NNN property through a syndication, a DST or a REIT?

Investors can own net lease property without buying a building through a private syndication or fund, a Delaware statutory trust (DST) or a public REIT. Each has its own minimum and liquidity.

Relli's analysis of SEC Form D data covered 4,172 new filings for U.S. real estate offerings between October 1, 2025 and September 30, 2026. It found 29 with "net lease," "NNN," "triple net," "STNL" or "single tenant" in the issuer name. Twenty-one were DSTs; the other eight had a median stated minimum of $50,000. Names undercount; the research on median real estate minimums explains the method.

DSTs hold so much net lease property because of IRS limits. Under Revenue Ruling 2004-86, a DST trustee cannot renegotiate leases, re-lease space except after a tenant bankruptcy, borrow more or buy new property. Long NNN leases need none of that; the guide to NNN DSTs for a 1031 exchange covers the rules. Public net lease REITs trade daily, but their prices move with the market and with rates.

Where do you find triple net lease investments?

Triple net lease investments come from brokers and listing sites, sponsors' private offerings and DSTs, and the stock exchange. Brokers and listing sites sell whole buildings, sponsors and DSTs offer passive stakes, and the exchange lists REITs. Before you invest privately, search the sponsor on SEC EDGAR for past Form D filings. The guide to vetting a sponsor lists the other free checks.

On a sponsor marketplace such as Relli, you can compare private offerings from several reviewed sponsors and talk to each sponsor before you decide. Most offerings on Relli are for accredited investors, and the sponsor confirms eligibility before you invest. See open offerings.

Leases and taxes

Can you 1031 into NNN property, and does NNN rent get the QBI deduction?

Investors can 1031 exchange into an NNN building or a DST interest, but triple net property is excluded from the IRS QBI safe harbor. The cards below give the rules.

Underwriting

How do you underwrite a triple net lease deal?

Underwriting a triple net lease deal means testing the tenant, the lease and the building separately. A strong tenant on a short lease can lose money, and so can a long lease on a building nobody else wants. Ask the sponsor, and get the answers in writing:

1. Name the tenant entity. Parent, subsidiary or franchisee, and is there a corporate guaranty?
2. Check the rating. Which agency, what grade, and how has it moved in three years?
3. Count the years left. Plus renewal options and the rent at renewal.
4. Read the escalators. Fixed or CPI-linked, and how often?
5. Find the roof clause. Who pays for roof, structure and parking lot?
6. Ask for rent coverage. If the tenant reports store sales, how many times do they cover rent?
7. Price the empty building. What would it rent for, to whom, and how long would re-leasing take?
8. Stress the exit. What exit cap rate does the plan assume, and what happens to distributions if the 10-year Treasury stays above 5%?
9. Check concentration. How much rent comes from one tenant, industry or market?
10. List the fees. Acquisition, asset management, disposition and promote, and is a Form D on file?

Steps 1 to 4 set the cap rate you should pay. Steps 7 and 8 tell you what the property is worth if the tenant leaves. The guide to what syndication sponsors charge covers step 10.