What cap rates do NNN properties trade at?

It depends on tenant credit and how much lease term is left. Investment-grade tenants with 15+ year leases trade at 5.00-5.75%; investment-grade with 10-15 years at 5.50-6.25%; national credit tenants at 6.00-7.00%; and regional or franchise tenants at 6.50-7.50%, per CoStar Group. Drug stores run 5.25-6.25% on 20-25 year leases; dollar stores 6.00-7.25% on 15-year terms.

How much management time does a NNN property require?

A single-tenant NNN runs about 0-1 hours a month, because the tenant covers all the operating expenses, property taxes, insurance, and maintenance, per the National Association of Realtors. Compare that to 15-20 hours a month on a 20-unit multifamily and 8-12 hours on a multi-tenant retail center. It's the most passive way to own real estate directly.

What types of properties are common NNN investments?

The ones you'll see most are drug stores (10,000-14,000 SF, 20-25 year leases, 5.25-6.25% cap rates), quick-service restaurants (2,000-4,500 SF, 15-20 year leases, 4.50-6.50% cap rates), dollar stores (8,000-12,000 SF, 15-year leases, 6.00-7.25% cap rates), and auto parts stores (6,000-8,000 SF, 15-20 year leases, 5.75-6.75% cap rates), per CoStar Group.

What are the biggest risks of NNN investing?

Four things I watch. Tenant bankruptcy, which I mitigate by sticking to essential retail (pharmacy, grocery, auto). Lease expiration when above-market rents reset, mitigated by buying longer remaining terms and comparing contract rent to market rent. Interest rate risk squeezing the cap rate spread, mitigated with fixed-rate, term-matched financing. And obsolescence, which bites when the building has little alternative use value.

What is the difference between NNN, gross, and modified gross leases?

In a triple net (NNN) lease, the tenant pays base rent plus all the property taxes, insurance, and maintenance. In a gross lease, the landlord pays the operating expenses and bakes them into a higher rent. A modified gross lease splits the expenses, often with the tenant covering utilities and janitorial while the landlord handles taxes and insurance.

How do I evaluate the credit quality of a NNN tenant?

For national tenants, start with the public ratings from Moody's, S&P, and Fitch. For unrated tenants, ask for financial statements and run the rent coverage ratio (revenue divided by rent). Above 2.0x tells you they can carry the rent comfortably. I also look at how stable the industry is, how many locations they run, how long they've been in business, and whether a parent company guarantees the lease.

What happens when a NNN lease expires?

You're facing re-leasing risk. If the tenant renews, the cap rate usually compresses because there's less term left. If they walk, you're finding a replacement and possibly writing a check for tenant improvements. Properties with below-market rents in good locations tend to renew at higher rents, which pushes the value up.

The Complete Guide to Triple Net (NNN) Lease Investing

Name: Triple Net (NNN) Lease Cap Rates and Property Type Benchmarks 2025–2026
Creator: Lornell Real Estate
License: https://www.lornellre.com/terms

A triple net (NNN) lease is the most hands-off real estate I broker. Figure on 0-1 hours of management a month, a rent check that doesn't move, and a tenant who pays every operating expense. Per the National Association of Realtors, NNN properties leased to investment-grade tenants on 15+ year terms are trading at 5.00-5.75% cap rates right now. You get bond-like income, better tax treatment, and rent escalations written into the lease that push back against inflation.

Key Takeaways

Passive Income Potential: Single-tenant NNN properties run about 0-1 hours of management a month. It's as passive as direct ownership gets.

Predictable Returns: Investment-grade NNN with 15+ year leases trades at 5.00-5.75% cap rates today.

Tenant Responsibility: In a triple net lease the tenant pays every operating expense, taxes, insurance, and maintenance, on top of base rent.

Long-Term Stability: Initial terms usually run 10-20 years, and with options the total lease can stretch to 30-40 years.

Tax Advantages: You still get depreciation and 1031 exchange eligibility, which is where the real deferral shows up.

Definition

Triple Net (NNN) Lease is a commercial lease structure where the tenant is responsible for paying all property operating expenses, including property taxes, insurance, and common area maintenance (CAM), in addition to base rent.

Key Takeaway

Management time: 0-1 hours/month for single-tenant NNN vs. 15-20 hours for multifamily (National Association of Realtors)

Lease terms: Typical NNN leases run 10-20 years initial with options extending to 30-40 years total (CoStar Group)

Cap rate benchmarks: Investment-grade tenants at 5.00-5.75%; national credit at 6.00-7.00%; regional/franchise at 6.50-7.50% (CoStar Group)

Tax advantages: Depreciation, 1031 exchange eligibility, and potential for tax-deferred cash flow (IRS)

What a triple net lease actually is

In a triple net lease (NNN) the tenant pays every operating expense on top of base rent:

Net of property taxes
Net of insurance
Net of maintenance (CAM)

You cash the rent check and carry almost no responsibility.

How NNN stacks up against other lease structures

Expense	Gross Lease	Modified Gross	NNN Lease
Base Rent	Tenant	Tenant	Tenant
Property Taxes	Landlord	Varies	Tenant
Insurance	Landlord	Varies	Tenant
CAM	Landlord	Varies	Tenant
Roof/Structure	Landlord	Landlord	Varies*

*Some NNN leases are "absolute NNN" where tenant handles everything.

Why investors keep coming back to NNN

1. The cash flow doesn't surprise you

Expenses aren't your problem, so your rent check stays the same whether operating costs go up or down.

2. Almost nothing to manage

Time Commitment Comparison:

Property Type	Hours/Month
Multifamily (20 units)	15-20
Retail center (multi-tenant)	8-12
Single-tenant NNN	0-1

3. Long leases

Terms typically run 10-20 years, and with options they extend to 30-40 years total.

4. Credit tenants

A lot of NNN properties are leased to investment-grade tenants: Fortune 500 companies, national retailers, government agencies.

Reading cap rates

Where NNN cap rates sit right now

Tenant Credit	Lease Term	Cap Rate Range
Investment Grade	15+ years	5.00-5.75%
Investment Grade	10-15 years	5.50-6.25%
National Credit	10+ years	6.00-7.00%
Regional/Franchise	10+ years	6.50-7.50%

What moves the cap rate

Lower Cap Rates: Investment-grade credit, longer term, strong location, rent increases

Higher Cap Rates: Weaker credit, shorter term, tertiary location, flat rent

The property types you'll see most

Drug Stores

Metric	Range
Size	10,000-14,000 SF
Lease term	20-25 years
Cap rate	5.25-6.25%

Quick Service Restaurants

Metric	Range
Size	2,000-4,500 SF
Lease term	15-20 years
Cap rate	4.50-6.50%

Dollar Stores

Metric	Range
Size	8,000-12,000 SF
Lease term	15 years
Cap rate	6.00-7.25%

Auto Parts

Metric	Range
Size	6,000-8,000 SF
Lease term	15-20 years
Cap rate	5.75-6.75%

Due diligence checklist

Lease Analysis

Term	What to Look For
Lease term	Years remaining + options
Rent increases	Annual bumps (1.5-2.5% ideal)
Expense responsibility	True NNN or modified?
Termination	Any early termination clauses?

Tenant Credit Analysis

For private or franchise tenants, ask for:

Unit-level P&L
Franchisee financial statements
Rent coverage ratio (should be >2.0x)

The risks, and what I do about them

Tenant bankruptcy

Mitigation: Focus on essential retail (pharmacy, grocery, auto)

Lease expiration

Mitigation: Buy longer terms; analyze market rent vs. contract rent

Interest rates

Mitigation: Use fixed-rate financing; match loan term to hold period

Obsolescence

Mitigation: Consider building's alternative use value

"
"NNN properties remain the gold standard for passive income in commercial real estate. The combination of credit tenancy, long lease terms, and minimal management creates an income stream that closely resembles a bond but with inflation protection through rental escalations," says **Todd Lornell**, Principal & Founder, Lornell Real Estate

Lornell Real Estate helps investors source NNN opportunities across Central Massachusetts and New England. Get in touch and we'll talk through your investment criteria.

Warning

Limitations: Cap rates, pricing, and transaction volume cited reflect market-level averages at the time of publication and may not apply to individual properties. Property values depend on asset-specific factors including condition, tenant credit quality, lease terms, location, and financing structure. Tax rules (including 1031 exchange provisions, capital gains rates, and depreciation schedules) change with legislation. This article does not constitute investment, tax, or legal advice. Consult a qualified CPA, attorney, and commercial real estate broker before making transaction decisions.

Sources & References

CoStar
CoStar Group
IRS
National Association of Realtors

This article cites data from the sources listed above. For the most current figures, consult the original publications directly.

Data current as of publication date. Market conditions, rates, and regulations may have changed. Consult a qualified commercial real estate professional before making investment decisions.

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