Triple Net Leases Explained: Pros and Cons for Small Commercial Property Owners
When it comes to owning commercial real estate, how you lease your property can significantly impact your cash flow, responsibilities, and long-term profitability. One of the most common lease structures—especially for retail and office spaces—is the Triple Net Lease, often referred to as an NNN lease.
But what does this actually mean for small property owners?
In this article, we break down how triple net leases work, and explore the key benefits and potential drawbacks for owners of single commercial properties.
What Is a Triple Net Lease?
A triple net lease is a type of lease agreement where the tenant is responsible for paying three primary expense categories in addition to base rent:
Property Taxes
Building Insurance
Maintenance and Operating Expenses (often called CAM or common area maintenance)
This structure shifts much of the financial responsibility for the property from the landlord to the tenant.
Pros of Triple Net Leases for Small Owners
Predictable Cash Flow
Because the tenant is covering most expenses, your rental income becomes far more stable and predictable. There’s no surprise bill for a roof repair or a tax reassessment—it’s on the tenant.
Lower Operational Burden
Small property owners, especially those managing just one or two properties, often don’t have a full-time property manager. NNN leases reduce your need to stay deeply involved in day-to-day maintenance, insurance updates, or vendor coordination.
Attractive to Passive Investors
If your long-term goal is to retire on passive income or eventually sell the property, an NNN lease structure makes the investment more appealing. It often commands a premium from investors looking for “hands-off” opportunities.
Tenant Care
Tenants with NNN leases often treat the property more like owners, since they are financially responsible for upkeep. This may lead to better-maintained spaces and fewer repair calls.
Cons of Triple Net Leases for Small Owners
Lease Complexity
Triple net leases can be more complex than gross leases. If not drafted carefully, disputes can arise over what expenses count as "operating expenses" or who pays for capital improvements.
Vacancy Risk
When a tenant leaves, you're not only missing out on rent—you may suddenly become responsible for all the property expenses again. For small owners, this financial swing can be significant.
Maintenance Oversight Still Needed
Even though the tenant is responsible for repairs, you’ll still need to monitor the property to ensure those obligations are being fulfilled. A neglected roof or HVAC system can result in long-term damage.
Market Rent Misalignment
If a long-term NNN lease is signed during a down market, the base rent may lag behind market value for years—especially if no rent escalations are built in.
Is a Triple Net Lease Right for You?
Triple net leases can be a great fit for small commercial property owners who:
Want reduced day-to-day management responsibilities
Prefer stable, predictable income
Are leasing to established tenants with long-term intentions
Are willing to ensure the lease terms are well-defined and monitored
But they may not be ideal if:
You prefer to keep tight control over the property
Your tenant is small or less financially secure
You aren’t prepared for the full costs of vacancy
Final Thoughts
At Jade St. Realty, we work with small commercial property owners across North Lake Tahoe and Truckee to help structure leases that align with their goals—whether you're a first-time landlord or adding to your investment portfolio.
If you're considering a triple net lease for your property, or reviewing an existing one, our team is happy to assist with the details—from market analysis to lease negotiation support.
Contact us today to schedule a consultation and ensure your property is working for you—not the other way around.