Investing in NNN (Triple Net) properties has become one of the most sought-after strategies for real estate investors looking for predictable, passive income with minimal operational risk. From corporate-leased retail to single-tenant QSRs, these assets can offer long-term stability, inflation protection, and hands-off ownership.
But while NNN properties seem simple on the surface, even seasoned investors can fall into common traps — and the consequences can be costly.
In this post, we’ll break down the top 5 mistakes investors make in NNN deals, and more importantly, how you can avoid them with a smarter acquisition strategy.
🔹 Mistake #1: Assuming “NNN” Always Means No Responsibilities
Many investors think “Triple Net” automatically means zero landlord responsibility. But that’s not always the case.
A standard NNN lease typically shifts taxes, insurance, and most maintenance to the tenant — but not always the roof, structure, or parking lot. If you don’t verify this, you could end up with unexpected CapEx obligations.
✅ How to Avoid It:
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Always ask for and review the lease abstract or full lease.
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Look for the term “Absolute NNN” or “Bond Lease” — this means the tenant is responsible for 100% of all costs, including structure and roof.
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Don’t rely on broker summaries alone — verify everything.
🔹 Mistake #2: Buying on Cap Rate Alone
While Cap Rate is important, it’s only part of the story. Some investors chase a 6.50% cap deal without realizing the lease has 2 years remaining, no options, or is backed by a weak tenant guarantee.
Remember: A higher cap rate often signals higher risk — shorter lease, private tenant, poor location, or limited rent growth.
✅ How to Avoid It:
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Weigh cap rate against risk factors: lease length, creditworthiness, rent escalations, and location quality.
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Focus on risk-adjusted returns, not just headline yield.
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Compare deals by tenant type: A 5.00% cap on a corporate Chick-fil-A may be far better than a 6.75% cap from a private laundromat.
🔹 Mistake #3: Ignoring Lease Term Remaining
This is a big one. Lease term remaining is directly tied to:
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Financing eligibility
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Exit value
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Cash flow security
Buying a NNN deal with under 5 years remaining and no renewal options puts you at risk of:
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Vacancy
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Downtime
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Re-tenanting costs
In some cases, you may be left with a vacant building worth less than what you paid.
✅ How to Avoid It:
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Look for leases with 10–15 years remaining.
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Confirm multiple 5-year renewal options.
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If you’re buying short-term leases, be strategic: price must reflect risk, and exit plan should be clear.
🔹 Mistake #4: Overlooking Rent Escalations
A flat lease might give you predictable income, but with no rent increases, your yield gets eaten away by inflation over time.
Investors often overlook this, especially in bond-style leases. In 5–10 years, your fixed income stream could have 15–25% less purchasing power.
✅ How to Avoid It:
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Prioritize leases with built-in rent increases:
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2% annually
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10% every 5 years
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CPI-based increases
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These escalations not only protect your yield but increase the resale value of your property down the line.
🔹 Mistake #5: Not Evaluating the Real Estate
Some investors are so focused on the lease that they forget they’re also buying a piece of real estate. What happens when the lease expires?
If the tenant leaves, your building’s location, access, visibility, and local market will determine how easily it can be re-leased or sold.
A NNN Dollar General in a declining town with zero traffic may be cheap — but it’s also much harder to reposition or sell.
✅ How to Avoid It:
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Underwrite the real estate as if it were vacant.
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Ask: Would another tenant lease this location if needed?
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Favor hard-corner sites, high-traffic corridors, and proximity to population growth or economic anchors.
Recap: The Smart Investor’s Checklist
Before you write that LOI, ask yourself:
✔ Is the lease truly Absolute NNN or are there hidden expenses?
✔ Does the tenant guarantee come from the corporate entity, or is it a local franchisee?
✔ Is there enough lease term left to protect my investment or resale value?
✔ Are there rent escalations built in to hedge inflation?
✔ Is the real estate fundamentally sound in case the tenant vacates?
When you have the right answers to these questions, NNN deals become some of the most reliable, low-risk vehicles in commercial real estate.
Bonus: 3 Red Flags That Should Make You Pause
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NNN Lease… but Roof is Excluded
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Translation: You could be facing a $100K repair with no help from the tenant.
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Private Equity-Backed Tenant
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Ask: Is the tenant profitable, or is it a roll-up play?
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5-Year Lease with No Options
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You’re buying income for 60 months — then what?
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FAQ – NNN Mistakes Investors Should Avoid
Q1: How do I verify if the lease is truly “Absolute NNN”?
Ask the broker to provide the lease abstract or actual lease, and review the section outlining landlord vs. tenant obligations. Look for language stating the tenant is responsible for “all expenses, including roof, structure, and capital repairs.”
Q2: What if I love a tenant but the lease only has 4 years left?
If the tenant is strong, you can:
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Negotiate an early lease extension as part of the LOI
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Price the risk accordingly (i.e., expect a higher cap rate)
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Have a clear exit or re-tenanting strategy
Q3: Are rent bumps really that important in a 10-year lease?
Yes — especially in today’s inflationary environment. A flat lease will slowly erode your real returns. Even 2% annual increases can result in a significant value difference by year 10.
Conclusion: Avoid the Pitfalls, Maximize the Return
NNN investments are powerful — but they aren’t foolproof. By understanding the common mistakes investors make and learning how to sidestep them, you can position your capital in high-performing, low-risk assets that provide consistent income for years to come.
If you’re evaluating a deal now — or preparing for a 1031 exchange — and want help under the hood to make sure the lease, tenant, and real estate all check out…
Let’s transact.