A triple net lease is a lease where the tenant pays rent as well as property insurance, property maintenance, and property taxes.
If you do not want to read about the process of calculating a triple net lease, I recommend you visit my triple net lease calculator or my advanced triple net lease calculator.
Actually calculating a triple net lease is easy. Usually the rent is quoted as dollars per rentable square foot. Then the building operating expenses (this includes the property insurance, property maintenance, and property taxes) are also quoted as dollars per rentable square foot, and are then added on to the rent. The total rent and expenses is then multiplied by the number of rentable square feet that the tenant will rent.
Here is an example of a potential commercial rental scenario for an actual commercial building located in Denver. A company decides to rent space on the first floor of a building. The first floor has 8,550 rentable square feet “RSF” available for rent. The lease rate is $22 / RSF, and the operating expenses are estimated at $8.50 / RSF.
The starting lease rate is $22 / RSF. This is a yearly rate, as commercial leases are quoted per year. So we multiply the lease rate by the square feet to find out how much the lease will cost per year. In this example, the lease will cost $188,100 per year.
We then calculate the building operating expenses (this is the NNN part of the lease). This particular property is quoting an ESTIMATE of $8.50 / RSF. Again, this is an annual rate. In this example, the operating expenses for the space is $72,675 per year.
We add these two figures together to find out how much it will cost to rent this space out for a year. In this example, the grand total for this lease is $260,775 per year.
Divide this grand total by 12 to learn what the monthly lease payments would be. In this example, the monthly lease payments are $21,731.
Earlier, you saw that the operating expenses were ESTIMATED at $8.50 / RSF. If, at the end of the year, the operating expenses come out to $8.00 / RSF, the tenant would receive a refund. However, if the operating expenses actually cost $10 / RSF, the tenant will owe additional rent. The tenant is charged the ACTUAL operating expenses. The estimate just helps the tenant and landlord create a budget for these items, and the tenant pays the monthly budgeted amount until such time as the estimate is reconciled with the actual expenses.
Finally you may want to calculate the monthly price per rentable square foot. To do this, simply divide the base rent by 12, and the operating expense estimate by 12, and then add these two together in order to see the total you are paying per rentable square foot per month.
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