The Top 5 best triple-net lease REITs

Triple-net lease REITs work like this: a company buys an office building then leases it back to the seller for a long term (typically 10 to 20 years). This is beneficial to both the buyer (the REIT) and the seller (the tenant).

How? The seller no longer has a mortgage to deal with, and they get a tax deduction for paying rent. The REIT gets a steady stream of income in the form of rent checks.

The REIT also benefits because the seller has to keep paying property taxes, insurance and maintenance costs (per the lease agreement). That’s where the name “triple-net” comes from. It’s generally regarded as a safer type of REIT than those that deal in mortgage derivatives and riskier mortgage securities.

A handful of REITs specializes in this form of triple-net leasing. Here are five with outstanding yields:

1) Caplease (LSE), 6.23% yield. A small-cap REIT focused on retail and office space.

2) Lexington Realty Trust (LXP), 5.61% yield. Another small-cap REIT focused on retail and office space.

3) LTC Properties (LTC), 5.32% yield. LTC focuses on the growing and lucrative health care field with leases on nursing and health facilities.

4) National Retail Properties (NNN), 5.65% yield. Holds 1,500 properties throughout the United States.

5) Realty Income (O), 4.70% yield. A stable REIT with tenants like FedEx and BJ’s Wholesale Club.

Photo by Svilen001.


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