Triple net, also known as NNN, is a type of commercial lease in which the tenant is responsible for paying not only the rent but also the property expenses such as property taxes, building insurance, and maintenance costs. This type of lease is common in commercial real estate and offers benefits to both landlords and tenants. In this article, we will discuss the steps involved in calculating triple net so that you can understand and manage your property investment better.

Here’s a step-by-step guide on how to calculate triple net:

Step 1: Determine annual property taxes

Begin by determining the annual property tax rate for your building. This information can usually be found on your local government’s website or by contacting the local tax assessor’s office. Once you have the tax rate (usually expressed as a percentage), multiply it by the assessed value of your property to determine the annual property taxes.

Step 2: Calculate annual building insurance

Obtain quotes from insurance providers to determine the annual cost of insuring your commercial property. Factors such as location, building size, construction materials, and business activities within the property can all impact insurance rates. Make sure to compare policies from several insurers to ensure you’re getting the best coverage at the most competitive price.

Step 3: Estimate annual maintenance costs

Estimate the costs of maintaining your commercial property throughout the year. This may include expenses such as routine cleaning, HVAC maintenance, landscaping, snow removal, and repairs for wear and tear. Keep track of these costs throughout the year and adjust your calculations as needed.

Step 4: Add all expenses together

Once you’ve calculated your annual property taxes, building insurance costs, and estimated maintenance expenses, add them together. This total represents your triple net expenses for the year.

Step 5: Divide by square footage

To calculate triple net on a per-square-foot basis, divide your total triple net expenses (from step

4) by the total square footage of your property. This will give you the cost per square foot, which you can then use to quote lease rates to prospective tenants.

Example Calculation:

Let’s imagine a commercial property with the following details:

– Assessed value: $500,000

– Property tax rate: 2%

– Annual building insurance: $3,000

– Estimated annual maintenance costs: $5,000

– Total square footage: 10,000 sq ft

Step 1: Calculate annual property taxes

$500,000 * 0.02 = $10,000

Step 2: Calculate annual building insurance

Already provided as $3,000

Step 3: Estimate annual maintenance costs

Already provided as $5,000

Step 4: Add all expenses together

$10,000 (property taxes) + $3,000 (building insurance) + $5,000 (maintenance costs) = $18,000 (total triple net expenses)

Step 5: Divide by square footage

$18,000 / 10,000 sq ft = $1.80 per square foot

In this example, the triple net cost for the commercial property would be calculated as $1.80 per square foot.

By understanding how to calculate triple net accurately, you can better manage your commercial property investments and ensure that your lease agreements reflect a fair distribution of expenses between landlords and tenants.