[Triple Net Lease](/blog/triple-net-lease-investing) Investing: The Complete Guide to NNN Properties in 2026

Triple net lease (NNN) properties are one of the most hands-off ways to invest in commercial real estate. You buy a building, a tenant pays the rent plus all operating expenses, and you collect a check every month. No maintenance calls. No property tax bills. No insurance headaches.

Sound too good to be true? It's not — but there are real risks you need to understand before writing a check. This guide covers how NNN leases actually work, what returns to expect, how to evaluate tenants and locations, and where investors commonly get burned.

What Is a Triple Net Lease?

A triple net lease shifts three major expense categories from the landlord to the tenant:

1. Property taxes — The tenant pays the full property tax bill directly or reimburses the landlord.
2. Insurance — The tenant carries and pays for property insurance.
3. Maintenance and repairs — The tenant handles all maintenance, including structural repairs in many cases.

As the landlord, your only responsibility is collecting rent. Some NNN leases even require the tenant to handle roof and structural repairs, though this varies by agreement.

NNN vs. Other Lease Types

The distinction between NNN and absolute net matters. In a standard NNN lease, you might still be on the hook for major structural issues like a foundation problem. In an absolute net lease, the tenant covers literally everything — even tearing down and rebuilding the structure if needed.

Why Investors Love NNN Properties

Predictable Cash Flow

NNN tenants sign long-term leases, typically 10 to 25 years. Many include scheduled rent increases of 1% to 2% annually or bumps every five years. You know exactly what your income looks like for the next decade or more.

Minimal Management

There's no tenant turnover every year, no maintenance requests at 2 AM, no coordinating plumber visits. Many NNN investors never visit their properties. Some use a simple LLC and a bank account — no property manager needed.

Credit-Worthy Tenants

The most popular NNN properties are leased to investment-grade tenants — companies with credit ratings from S&P or Moody's. Think Walgreens, Dollar General, Starbucks, FedEx, or McDonald's. These companies aren't going to skip rent.

[1031 Exchange](/blog/1031-exchange-guide) Friendly

NNN properties are a popular landing spot for 1031 exchanges because they're straightforward to underwrite and close quickly. If you're selling an apartment complex and want to stop managing tenants, a NNN Walgreens with 12 years left on the lease is appealing.

Typical NNN Cap Rates in 2026

Cap rates ([net operating income](/blog/net-operating-income-guide) divided by purchase price) vary based on tenant credit quality, lease term remaining, and location. Here's what the market looks like:

• Investment-grade tenants (15+ years remaining): 5.0% – 6.0%
• Investment-grade tenants (5–10 years remaining): 6.0% – 7.0%
• Non-investment-grade tenants (10+ years): 6.5% – 8.0%
• Non-investment-grade tenants (under 5 years): 7.5% – 9.5%

Lower cap rates mean higher prices, but they also reflect lower risk. A Chick-fil-A with a brand-new 20-year lease in a growing suburb will trade at a 4.5% to 5.0% cap rate because the risk of losing that income stream is near zero.

How to Evaluate a NNN Investment

1. Tenant Credit Quality

This is the single most important factor. The entire value of a NNN property depends on the tenant's ability to pay rent for the full lease term.

• Investment-grade tenants (BBB- or higher from S&P) are the safest. Companies like Walmart, CVS, and Home Depot.
• Sub-investment-grade tenants offer higher returns but carry real risk. A regional restaurant chain might fold during an economic downturn.
• Franchisees vs. corporate-guaranteed leases — A McDonald's leased to McDonald's Corporation is different from a McDonald's leased to a local franchisee with five locations. The franchisee can go bankrupt while the brand thrives.

Always check who actually signs the lease. The guarantor matters more than the sign on the building.

2. Remaining Lease Term

More years remaining = more valuable. A Dollar General with 15 years left is worth significantly more than the same store with 3 years left, because the income stream is more certain.

When a lease has fewer than 5 years remaining, you face re-tenanting risk — the possibility that the current tenant leaves and you're stuck with an empty building designed for a specific use.

3. Location and Real Estate Fundamentals

Even with a 20-year lease, the underlying real estate matters. Ask yourself:

• Is the area growing or declining?
• What are the traffic counts?
• Could this building be re-leased or repurposed if the tenant leaves?
• Are there competing locations nearby that could pull the tenant away at renewal?

A NNN Starbucks on a busy corner in Austin, Texas is more valuable than the same lease in a shrinking rural town — even if the rent and lease terms are identical.

4. Lease Structure and Rent Bumps

Read the actual lease. Key things to look for:

• Rent escalations — Fixed increases (1.5% annually) are better than flat rent for 20 years. Inflation will erode your purchasing power without bumps.
• Renewal options — Does the tenant have options to renew, and at what rent?
• Termination clauses — Can the tenant exit early under any circumstances?
• Maintenance obligations — Exactly what does the tenant cover? Roof and structure? Parking lot? HVAC replacement?

5. Price Per Square Foot and Replacement Cost

Compare your purchase price to what it would cost to build the same building new. If you're buying at well below replacement cost, you have a margin of safety even if the tenant leaves.

Common NNN Property Types

Retail

• Pharmacies (Walgreens, CVS) — Long leases, investment-grade credit. Trading at 5.5%–6.5% cap rates.
• Dollar stores (Dollar General, Dollar Tree) — High volume of deals available, typically $1M–$2M price range. Good entry point.
• Quick-service restaurants (McDonald's, Chick-fil-A, Starbucks) — Tight cap rates but extremely reliable tenants.
• Auto parts (O'Reilly, AutoZone) — Recession-resistant demand, strong credit.

Industrial

• Distribution centers (FedEx, Amazon) — Larger investments ($5M+), but tenants rarely leave purpose-built facilities.
• Manufacturing — Higher yields but specialized buildings that are hard to re-tenant.

Medical

• Dialysis centers (DaVita, Fresenius) — Essential healthcare, long leases, predictable demand.
• Urgent care and dental — Growing sector with 10–15 year leases common.

Risks of NNN Investing

Tenant Bankruptcy

If your tenant goes bankrupt, you own an empty building with no income. Even investment-grade tenants can fail — Rite Aid filed for bankruptcy in 2023 despite decades as a national pharmacy chain. Diversification across tenants matters.

Below-Market Rent at Renewal

Some NNN leases lock in rent for decades. If market rents rise faster than your scheduled increases, your tenant is getting a great deal — and when the lease expires, they might not renew if you try to raise rent to market. Paradoxically, above-market rent is also a risk: the tenant might leave because they can lease cheaper space elsewhere.

Interest Rate Sensitivity

NNN properties are essentially bonds with a building attached. When interest rates rise, cap rates tend to rise too, which pushes property values down. If you buy a NNN property at a 5% cap rate and rates push cap rates to 7%, your property just lost significant value on paper.

Obsolete Locations

A 20-year lease sounds safe until you realize the highway exit moved, the neighborhood declined, or the tenant's business model changed. The tenant will leave at lease expiration, and you're stuck with a purpose-built building nobody wants.

How to Finance NNN Properties

NNN properties are popular with lenders because of their stable cash flow:

• Conventional commercial loans — 65%–75% LTV, 25-year amortization, 5–10 year terms.
• SBA loans — Available for smaller deals, especially if you're owner-occupying part of the property.
• CMBS loans — For larger deals ($3M+), often non-recourse.
• [Seller financing](/blog/seller-financing-guide) — Common in NNN deals, especially for 1031 exchange sellers who want installment sale treatment.

Many investors purchase NNN properties with 30%–40% down and use the stable income to cover debt service with room to spare. A typical [debt service coverage ratio](/blog/best-dscr-lenders-2026) (DSCR) target is 1.25x or higher.

Building a NNN Portfolio

Sophisticated NNN investors build diversified portfolios across:

• Multiple tenants — Don't put all your money in one brand.
• Multiple geographies — Spread across growing markets.
• Staggered lease expirations — Avoid having all leases expire the same year.
• Mix of investment-grade and higher-yield tenants — Balance safety with returns.

A reasonable target portfolio might be 60% investment-grade tenants at lower cap rates and 40% sub-investment-grade at higher yields, spread across 5–10 properties in different states.

FAQs

How much money do I need to start investing in NNN properties?

Entry-level NNN properties like Dollar General or dollar stores start around $1 million to $1.5 million. With 30%–35% down, you need $300,000 to $500,000 in equity to get started. Some investors enter through NNN-focused REITs or DSTs (Delaware Statutory Trusts) with lower minimums of $25,000 to $100,000.

What is a [good cap rate](/blog/cap-rate-explained) for a NNN property?

It depends on your risk tolerance. A 5.0%–5.5% cap rate on an investment-grade tenant with a long lease is considered strong in 2026. Higher cap rates (7%+) signal more risk — shorter lease terms, weaker tenants, or less desirable locations.

Are NNN properties truly passive?

Close to it. You'll still need to review lease compliance, manage your LLC, file taxes, and occasionally deal with lease renewals or tenant communications. But compared to managing apartments or retail centers, it's extremely low-effort. Many investors spend fewer than 5 hours per year per property.

What happens when a NNN lease expires?

You either negotiate a renewal with the existing tenant (often at a new rent rate), find a new tenant, or sell the property. Lease expiration is the highest-risk period for NNN owners, which is why properties with shorter remaining terms sell at higher cap rates (lower prices).

Can I invest in NNN properties through a [self-directed IRA](/blog/dscr-loan-self-directed-ira)?

Yes. Self-directed IRAs and solo 401(k)s can hold NNN properties. The income grows tax-deferred (traditional) or tax-free (Roth). You'll need a custodian that handles real estate, and you cannot personally guarantee any debt on the property — it must be non-recourse financing.

How do NNN properties compare to residential rental properties?

NNN properties offer longer leases, less management, and more predictable income. Residential rentals offer more appreciation potential, easier financing, and lower entry costs. NNN is better for investors who want passive income. Residential is better for investors who want to build equity through value-add strategies.

Bottom Line

Triple net lease investing is one of the most straightforward paths to [passive real estate](/blog/real-estate-syndication-101) income. Buy a well-located property leased to a creditworthy tenant on a long-term lease, and you collect rent while they handle everything else.

The key is doing your homework upfront: evaluate the tenant's credit, read the lease carefully, understand the location's long-term viability, and pay a fair price. Get those right, and a NNN property can deliver steady, predictable returns for decades.

Related Articles

• 1031 Exchange for Beginners: Complete Guide to Deferring Capital Gains Taxes
• 1031 Exchange: Defer Taxes, Build Wealth Faster
• Property Taxes Explained: How They Work and How to Reduce Them