Net Net Net
Properties (NNNs)

A triple net (or NNN) leased property is typically a free-standing building that is leased and occupied by one user, or company, most often a retail tenant.

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Rexco 1031 NNNs

The Main Types of NNN Properties Include:

Drugstores: Walgreens, CVS

Automotive: Autozone, O’Reilly, Advance Auto Parts

Fast Food: Starbucks, Taco Bell, Burger King, Wendy’s

Dollar Stores: Merchandise/groceries to moderate income consumers, Dollar General, Family Dollar, Dollar Tree

Casual Dining: Applebee’s, IHop, Panera Bread, Red Lobster

Grocery StoresWinn Dixie, Natural Grocers, Food Lion

Bank Branches: Chase, Citibank, Bank Of America

Convenience Stores/Gas Stations: 7-Eleven, Circle K, Wawa

MedicalDialysis: DaVita, Fresenius

Medical – OtherNextcare Urgent Care, National Urgent Care


About NNN properties

The tenant is usually committed to a long term lease of ten years or more with increasing rent due over the term of the lease. The NNN descriptor indicates that the tenant is responsible for paying their rent, plus some or all of the operating expenses such as taxes, insurance, utilities and maintenance – hence the term “Net Net Net or NNN”. This type of lease is mostly, but not all passive since lease renewals, financing and sales of the property fall to the owner. One of the main benefits of most NNN properties is that you collect a rent check each month, and the tenant takes care of most, if not all, of the typical hassles of property ownership and maintenance.

One of the many benefits of investing in single tenant net leased properties is that they typically provide a steady and dependable cash flow. This is because of the long-term nature of the lease AND the strong credit of the tenant. Large, well-capitalized publicly traded companies may go bankrupt and fail to pay their rent — this is possible but not likely.

While a strong tenant is certainly important, the property’s location should be an investors’ most important criterion. Over time, a property with an excellent location and average tenant will usually perform better than an average location with a great tenant. Fortunately, most of the NNN leased properties occupied by major retail tenants have excellent locations, as these retail companies are very selective in determining where to put their store locations.

The most important considerations to be evaluated in a NNN property include:

Location – On a prime corner with high traffic counts for example

Property – The type and quality of the building is important to consider as it impacts the likelihood of lease renewal by the tenant, and also increases your ability to place new tenants in case the lease is not renewed.

Tenant – Who is the tenant, hopefully a publicly traded company with a high credit grade? It is important to distinguish between corporately guaranteed leases vs franchise backed leases. A lease by an individual who is operating a franchisee owned fast food location will be much less secure than one owned and leased by the corporation.

Lease terms – The ideal lease is long term, have regularly scheduled rent increases, and free from early termination clauses. For example, recent Starbucks leases have termination clauses in them with modest “penalty” payments, leaving owners of those properties at risk of a closure by the coffee king.

Buyers completing a 1031 exchange make up a large percentage of the NNN market. In addition to limiting their management responsibilities, the investor’s motivation is to complete the 1031 exchange to avoid paying taxes on sale. In many cases, entering into a 1031 from a multifamily property into a NNN can result in higher cash flow than paying taxes on a sale and reinvesting the proceeds.


What is a “Credit Tenant”

A significant determinant of value for NNN properties is the financial strength of the tenant guaranteeing the lease. The stronger the tenant’s credit, the less likely there will be a default on the lease. This makes stronger credit tenants much more desirable, especially for risk averse investors. Below are the main tenant credit types and their descriptions.

Investment Grade

Investment grade tenants are tenants who have an investment grade credit rating by a main credit rating agency such as Standard & Poor’s, Fitch or Moody’s. An investment grade rating is a strong indication of a company’s financial strength and NNN properties with tenants who have these ratings are in very high demand. The minimum investment grade rating is BBB- for Standard & Poor’s and Baa3 for Moody’s.


Below Investment Grade

Below investment grade tenants are tenants who have a credit rating but they are not rated high enough to be considered investment grade. While NNN properties with below-investment grade tenants can still make suitable investment vehicles, the default risk is higher and is often reflected in higher cap rates compared to properties with investment grade tenants.



Unrated tenants are tenants without a credit rating by a national agency. Many multiunit restaurant franchisees are not large enough to have a credit rating but often have attractive financial statements. When purchasing an NNN property with an unrated tenant, it is ideal to review the tenant’s financial statements with an accountant or financial advisor to obtain an assessment of the tenant’s credit worthiness.


Where are the best NNN leased properties located and does it need to be close to where you live?

Unlike a commercial property that is management intensive and requires frequent site visits such as an apartment building or neighborhood strip center, living close to your investment is much less important for single credit tenant NNN properties. This is because the credit tenant is typically responsible for most, if not all of the operating costs for the property, and they don’t need you if there is a roof leak or plumbing problem. They are responsible for these issues.

Most of our clients prefer to purchase their single tenant properties in high-growth, low-tax states which exhibit both job and population growth in a business-friendly state. Some of the most popular properties are in Texas, Tennessee, North Carolina and Florida.



Bank Of America


Tractor Supply Co.

Dollar Tree