Economics
Typically, the buildings in which landlords use triple net leases (NNN) are 'equity investments', rather than 'cash flow investments'. For example, the owner will finance a significant portion of the purchase price on a property and pay the resulting mortgage with the lessee's monthly owed rent. There is usually a small amount left over as monthly profit for the owner (positive cash flow), but the greater investment payoff comes from the tax shields afforded to the owner through the use of leverage or gearing. The resulting property is then sold after a period of equity-building, usually five years – the typical commercial mortgage term.
Read more about this topic: Net Lease
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