Lease Structure
Absolute NNN Lease
The gold standard for truly passive real estate income
An absolute NNN lease (also called a 'bondable lease') is the purest form of triple net lease. The tenant is responsible for 100% of property-related expenses — property taxes, insurance, all maintenance, roof replacement, and structural repairs. The landlord's only responsibility is to collect rent. This is the most landlord-friendly lease structure in commercial real estate and the gold standard for passive investors.
Term
15-25 years initial + 5-year options
Rent Bumps
Flat, or 10% every 5 years
Cap Rate
5.5% - 7.0% typical
Tenants
Investment-grade national retailers
Who Pays What?
| Expense | Tenant | Landlord |
|---|---|---|
| Property Taxes | — | |
| Insurance | — | |
| Maintenance & Repairs | — | |
| Utilities | — | |
| Roof Replacement | — | |
| Structural Repairs | — | |
| Parking Lot Repairs | — | |
| HVAC Replacement | — |
Pros
- +Truly passive — landlord has zero operational involvement
- +Predictable monthly income
- +No surprise expenses or capital calls
- +Simple tax treatment (no active operations)
- +Easy to value (income approach works cleanly)
- +Attractive to 1031 exchange buyers at resale
Cons
- −Tighter cap rates than NN or multi-tenant
- −Single-point-of-failure (one tenant)
- −If tenant defaults, landlord has maintenance obligations
- −Tenant may under-maintain (not incentivized to over-invest)
- −Limited ability to modify property during lease term
Common Use Cases
How It Compares
Absolute NNN is more landlord-friendly than NN (Double Net), which still retains landlord responsibility for roof and structure. Compared to a ground lease, absolute NNN gives the landlord the building (not just land) — potentially more value at lease end but more risk during the lease term.
Investor Perspective
Absolute NNN is the foundation of passive commercial real estate investing. For investors who want to collect a rent check and not think about their property, this is the structure of choice. Most popular with 1031 exchange buyers, retirees, and investors diversifying from management-intensive rental properties.
Other Lease Types
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