An NNN lease, which is short for triple net lease, is a specific type of lease in which the lessee agrees to pay all real estate taxes, building insurance and maintenance and any other fees, such as rent. Rent is usually lower in a NNN lease, and real estate investors find NNN leases less burdensome because financial responsibility lies with the tenant.
On the downside for the lessor are potential tax implications. But they may also have certain tax disadvantages for the lessor. Section 469 of the Internal Revenue Code stipulates that an NNN lease that produces losses may be disallowed for tax benefits because of passive loss limitations.
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