As real estate investors search for passive, predictable income, net lease investments have emerged as a leading strategy — offering long-term stability, minimal management, and tenant-aligned lease structures. But for many new investors, the terminology can be confusing. What exactly is a net lease? And what are the differences between NNN, NN, and Absolute NNN leases?

This guide breaks down the most common types of net leases, their core differences, pros and cons, and which lease structure is best suited for your investment goals.

---

What Is a Net Lease?

A Net Lease is a type of commercial real estate lease where the tenant, rather than the landlord, is responsible for covering some or all of the property’s operating expenses. These expenses typically include:

• Property Taxes

• Insurance

• Maintenance and Repairs

The term “net” refers to these operating costs being passed through to the tenant. This structure shifts operational burden off the property owner and creates a more passive, hands-off investment experience.

Net leases can take several forms, including Single Net (N), Double Net (NN), Triple Net (NNN), and Absolute NNN. Each has a unique level of landlord responsibility, income stability, and risk.

---

Lease Type Breakdown: N, NN, NNN, and Absolute NNN

Let’s compare how each net lease structure functions:

---

🔹 Double Net Lease (NN)

In a NN lease, the tenant pays for property taxes and insurance, but the landlord remains responsible for the building’s structure and major systems, like the roof, foundation, or HVAC.

Investor Consideration:
While it reduces some operational burden, this lease still requires the owner to budget for capital expenditures. Common in multi-tenant strip centers, medical offices, or smaller national franchises.

---

🔹 Triple Net Lease (NNN)

In a Triple Net lease, the tenant is responsible for:

• Taxes

• Insurance

• Maintenance

This lease structure significantly reduces landlord involvement. However, unless it’s explicitly “absolute,” the landlord may still be responsible for structural issues (like roof or foundation repairs).

Investor Consideration:
These are the most commonly marketed deals for 1031 exchanges, private investors, and high-net-worth buyers seeking predictable income. You’ll see tenants like:

• Walgreens

• AutoZone

• Starbucks

• Dollar General

---

🔹 Absolute NNN (Bond Lease)

An Absolute NNN lease (also called a bondable lease) takes the NNN structure one step further. The tenant is responsible for 100% of all costs, including repairs and replacements of the roof, structure, parking lot, HVAC, and more — regardless of cost or casualty.

There are no landlord responsibilities. If the building burns down, the tenant rebuilds.

Investor Consideration:
This is the most passive and secure lease type for investors, typically offered by strong corporate tenants or franchisees with a history of performance. These properties command premium pricing due to the zero-management appeal.

---

Key Benefits of NNN & Absolute NNN Leases

Why are these net leases particularly attractive for investors?

1. Predictable, Passive Income

Because the tenant handles operating costs, net leases offer a fixed, contractually defined income stream. Rent is usually paid monthly or quarterly and escalates over time.

2. Minimal Management

No clogged toilets or middle-of-the-night phone calls. With NNN and Absolute NNN leases, property ownership is virtually hands-off.

3. Appealing to 1031 Exchange Buyers

These deals are ideal for investors using a 1031 exchange, allowing them to defer capital gains tax and roll into a stabilized, low-maintenance asset.

4. Scalable Investment Strategy

Net lease assets can be easily scaled into a diversified portfolio across tenants, industries, and regions, reducing exposure to any single market or operator.

---

Common Tenants & Use Cases by Lease Type

---

What to Look For in Net Lease Investments

Regardless of lease structure, focus on these criteria to reduce risk and increase long-term value:

▪ Tenant Credit

Look for tenants with strong financials and proven operational performance. Investment-grade tenants reduce default risk.

▪ Lease Term Remaining

Aim for leases with 10+ years remaining, and multiple 5-year renewal options. Short-term leases may be riskier or require re-tenanting.

▪ Rent Escalations

Verify the lease includes scheduled rent bumps (e.g., 2% annually or 10% every 5 years). These protect your yield against inflation.

▪ Location & Real Estate Fundamentals

Even with a national tenant, location matters. Prioritize hard-corner lots, strong traffic counts, proximity to highways, and favorable demographics.

---

Risks to Be Aware Of

No investment is without risk. Here are a few to watch for:

• Lease Ambiguity: Not all “NNN” leases are fully passive. Always read the lease abstract carefully.

• Tenant Credit Downgrades: A tenant’s financial situation can change. Monitor market trends and credit reports.

• Re-Leasing Risk: If the tenant vacates or chooses not to renew, re-tenanting the property can take time and capital.

Working with an experienced broker or advisor can help you underwrite leases accurately and avoid surprises.

---

FAQ – Net Lease Structures

Q1: Is a Triple Net lease always “hands-off”?

Not necessarily. A standard NNN lease shifts taxes, insurance, and maintenance to the tenant, but the landlord may still be responsible for roof and structure unless it’s an “Absolute NNN” or “Bondable” lease. Always verify lease terms.

---

Q2: Why do Absolute NNN leases command lower cap rates?

Because they offer zero landlord responsibilities, strong credit tenants, and longer lease terms, they are considered lower risk, which pushes cap rates down. Think of it like buying a high-grade bond — you’re paying for security and passive income.

---

Q3: Can I finance a NNN or Absolute NNN property?

Yes. In fact, lenders love corporate-guaranteed NNN assets due to their stable income streams. You can typically secure:

• 60–70% LTV

• 25-year amortization

• Fixed rates (currently ranging ~6.25%–7.00%)
  This can boost your cash-on-cash return if the deal is well structured.

---

Conclusion: Choose the Right Net Lease for Your Strategy

Whether you’re looking to retire with mailbox money, complete a 1031 exchange, or diversify your real estate holdings, understanding the differences between NN, NNN, and Absolute NNN leases is the key to making smart, risk-adjusted decisions.

Absolute NNN deals offer unmatched passivity and security, while standard NNN and NN leases may yield slightly higher returns with minor management. The right structure depends on your risk tolerance, return expectations, and timeline.

If you’re ready to explore active listings that match your goals — or if you want access to off-market NNN deals backed by top national tenants — let’s connect and build your next deal.

---

Let’s transact.