How Do Property Taxes And Insurance Work In Triple Net Lease Investments?
In a Triple Net Lease (NNN) investment, the tenant is responsible for paying property taxes, insurance, and maintenance costs in addition to the base rent. This means that the landlord, or the property owner, is not responsible for these expenses and can enjoy a more passive income stream.
When it comes to property taxes, the tenant will pay the property tax bill directly to the local government. The landlord will not be responsible for paying property taxes or any additional assessments. If the property taxes increase during the lease term, the tenant will be responsible for paying the additional amount.
Similarly, the tenant is responsible for obtaining insurance coverage for the property and naming the landlord as an additional insured. The landlord should also obtain insurance coverage for their interests in the property, such as liability insurance. In the event of a loss, the insurance proceeds will be paid directly to the tenant, who is responsible for making any necessary repairs.
It's important to note that the terms of the NNN lease will outline the specific responsibilities of the tenant and the landlord. It's essential to carefully review the lease agreement to understand who is responsible for what expenses and under what circumstances. Working with a real estate attorney or a commercial real estate broker can help ensure that the lease agreement is fair and balanced for all parties involved.
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