Lease Structures: Triple Net vs Gross

Two buildings can charge the same headline rent and still deliver very different income to their owners, because rent is only half the deal — a lease also says who pays the property taxes, insurance, and maintenance. In a gross lease, the landlord pays all of that out of the rent collected, so the landlord's net income swings with utility bills and repair costs. In a triple net lease (often written "NNN"), the tenant pays those three cost categories — taxes, insurance, and maintenance — directly, on top of a lower base rent, so the landlord's income is close to fixed regardless of what happens to costs.

Most real leases sit somewhere in between, splitting some costs (a "modified gross" lease), which is why reading the actual lease terms matters more than the label on the deal.

Worked example. A single-tenant retail building rents for $200,000/year gross, with the landlord paying $40,000/year in taxes, insurance, and upkeep, netting $160,000. The same building leased triple-net might rent for only $165,000, but with the tenant paying those costs directly, the landlord still nets close to $165,000 — a higher, and far more predictable, number than the gross deal's $160,000 that depends on costs staying put.