Triple Net (NNN) vs. Gross Leases: What Every Investor Should Know

When you’re investing in commercial real estate, understanding the difference between Triple Net (NNN) and Gross Leases is one of the most important things you can learn. The lease type determines who pays for what — and that directly affects your returns, responsibilities, and risk.

Let’s break down what each structure means, how they work in practice, and why investors choose one over the other.

1. What Is a Gross Lease?

A Gross Lease (sometimes called a “Full-Service Lease”) means the landlord covers most or all of the property’s operating expenses.The tenant pays one flat rental rate, and the landlord uses that income to pay for things like:

• Property taxes

• Building insurance

• Maintenance and repairs

• Utilities (sometimes)

• Common area upkeep

  
  

In other words, the landlord handles the headaches — and the costs — that come with ownership.

Gross leases are common in multi-tenant office buildings, medical spaces, and smaller retail centers, where expenses are shared and easier to predict.

2. What Is a Triple Net (NNN) Lease?

A Triple Net (NNN) Lease shifts most of those expenses to the tenant. Under this structure, the tenant pays:

• Net 1: Property Taxes

• Net 2: Insurance

• Net 3: Maintenance (including CAM—Common Area Maintenance)

  
  

The base rent is typically lower than in a gross lease, but once you add those extra costs, the tenant ends up paying for nearly all property expenses.

For landlords, it’s close to a “hands-off” investment — predictable income with minimal management.

NNN leases are most common in single-tenant retail and industrial properties, especially national credit tenants like Starbucks, Walgreens, or FedEx.

3. Why Investors Love NNN Properties

Predictable Cash Flow: Since the tenant handles taxes, insurance, and maintenance, you don’t get surprise repair bills or tax hikes eating into your income.

Lower Management Effort: Many NNN investors barely deal with property management. The tenant takes care of nearly everything — it’s as close to passive as real estate gets.

Long-Term Leases: Most NNN leases run 10–20 years with built-in rent escalations, so you have stability and clear income growth over time.

Attractive for 1031 Exchanges: If you’re selling another property, a NNN investment can be an easy, low-maintenance replacement asset — especially for investors who want to retire from active management.

4. Why Some Investors Avoid NNN Leases

Lower Cap Rates: Because of their low-risk profile, NNN properties typically trade at lower cap rates (less yield) than riskier investments.

Single-Tenant Risk: If your tenant leaves or defaults, you’re suddenly paying all expenses yourself — and often sitting on a vacant property that’s hard to re-lease.

Market and Credit Dependence: Your returns depend heavily on the tenant’s credit strength and the location’s long-term viability. A NNN Walgreens in a strong market is great; a local diner in a small town might not be.

5. Why Gross Leases Still Have Their Place

Gross leases can still be great investments — they just require more active management.

More Flexibility in Rent: You can adjust rents more easily to match market conditions and rising costs.

Multi-Tenant Risk Spreading: If one tenant leaves, others are still paying. You’re not reliant on a single occupant.

Value-Add Potential: Landlords can often improve net income by managing expenses efficiently, updating common areas, or repositioning space.

Gross leases give you control — which can mean higher returns if you know how to operate well.

6. Modified Gross: The Middle Ground

Between Gross and NNN leases is the Modified Gross Lease. It’s a hybrid structure where tenants pay base rent plus a portion of operating expenses — for example, utilities or janitorial costs.

This arrangement keeps costs more predictable for both parties and often works well in multi-tenant buildings.

7. Comparing the Two Side by Side

Feature	Gross Lease	Triple Net (NNN) Lease
Who pays property taxes?	Landlord	Tenant
Who pays insurance?	Landlord	Tenant
Who handles maintenance?	Landlord	Tenant
Landlord’s risk	Higher	Lower
Cap rates	Higher (risk premium)	Lower (stability premium)
Management required	Active	Minimal
Tenant type	Multi-tenant, smaller businesses	Single-tenant, national brands
Lease term	Shorter (3–5 years)	Longer (10–20 years)
Investor goal	Value-add or growth	Stable income, low management

8. Which Lease Type Is Better for You?

It depends on your investment goals:

• If you want consistent, low-touch income and can handle lower returns, a NNN property makes sense.

• If you prefer control, upside, and hands-on management, Gross or Modified Gross assets might be better.

• Many investors start with Gross leases to build experience and eventually transition to NNN properties for long-term stability.

  
  

Some investors even balance both — holding a few NNN retail properties for income and smaller Gross-leased buildings for value-add potential.

9. What to Watch Out For in Any Lease

Before you buy any leased property, read the lease abstract and full agreement. Key details to check:

• Are there rent escalations and when do they occur?

• Who handles roof and structure repairs (sometimes excluded from “maintenance”)?

• What happens if the tenant terminates early?

• Are there renewal or purchase options that affect your resale value?

The lease structure matters, but the fine print can completely change the economics.

10. The Real Takeaway

The best investors don’t pick between “NNN” and “Gross” based on buzzwords — they match the lease structure to their strategy. Both can perform well if bought right, priced correctly, and located in a market with long-term demand.

If you’re serious about passive income and predictable returns, Triple Net properties are tough to beat. If you prefer hands-on control and the chance to increase value through management, Gross leases give you that flexibility.

Either way, the lease you choose defines your cash flow, workload, and risk — so it pays to understand exactly what’s in the deal before you sign.