Under a triple-net lease, who bears taxes, insurance and maintenance?
Correct Answer
B) The tenant, on top of the base rent
Why this is correct: A triple-net (NNN) lease requires the tenant to pay base rent plus all operating expenses—taxes, insurance, and maintenance—shifting the burden from landlord to tenant. This results in a lower base rent compared to a gross lease. Why the other choices are wrong: 'The landlord, in exchange for the higher rent' describes a gross lease. 'The two parties, split by the lease's ratio' describes a modified gross lease, not a triple-net. 'The property manager, out of the fee' is not a standard lease provision. Exam tip: Remember 'NNN' = tenant pays all three Nets: taxes, insurance, and maintenance.
Why This Is the Correct Answer
Why this is correct: A triple-net (NNN) lease requires the tenant to pay base rent plus all operating expenses—taxes, insurance, and maintenance—shifting the burden from landlord to tenant. This results in a lower base rent compared to a gross lease. Why the other choices are wrong: 'The landlord, in exchange for the higher rent' describes a gross lease. 'The two parties, split by the lease's ratio' describes a modified gross lease, not a triple-net. 'The property manager, out of the fee' is not a standard lease provision. Exam tip: Remember 'NNN' = tenant pays all three Nets: taxes, insurance, and maintenance.
More Income Approach Questions
In a percentage lease, rent is commonly structured as:
In a DCF, what is the reversion?
Potential gross income differs from effective gross income in that PGI assumes:
The reversion in a discounted cash flow model represents:
Building A (new, credit tenant, 20-year lease) and Building B (older, month-to-month tenants) sell the same week. Their cap rates should differ how?
An overall rate extracted from a sale whose NOI excluded reserves, applied to a subject NOI that includes them, will:
Replacement reserves cover which kind of expenditure?
What is the primary distinction, for appraisal purposes, between 'vacancy loss' and 'collection loss'?
An appraiser is analyzing a mixed-use property with retail and office components. The retail segment has a potential gross income of $180,000 with a market vacancy of 8%. The office segment has a potential gross income of $120,000 with a market vacancy of 12%. What is the overall effective gross income for the property?
The mortgage constant represents:
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Previous Question
An appraiser is developing a band of investment rates for a mixed-use property in a transitioning neighborhood. She selects four reliable sources: (1) local commercial mortgage lenders’ current stated loan rates on stabilized properties; (2) recent equity investor return expectations cited in a CBRE market report; (3) historical IRRs from NCREIF Property Index for similar assets; and (4) the 10-year U.S. Treasury yield. Which of these four sources is LEAST appropriate for inclusion in the band of investment analysis?
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A replacement reserve of $350 per unit per year for a 24-unit building totals: