A net lease signifies a contractual agreement where a lessee pays a portion or all of the taxes, insurance fees and maintenance costs for a property in addition to rent. In essence, a net lease describes a scenario where the tenant is expected to pay for all the fees associated with a property, as if the tenant were the actual owner. Net leases are most commonly used with commercial real estate.
Typically, net leases are an attractive option for commercial real estate investors who are purchasing properties for the income and would like to eschew the headaches of arranging maintenance, paying municipal taxes and other associated responsibilities. Property owners turn to net leases when their goal is to transfer the burden of managing taxes, insurance and fees to the tenant. Although the owner/lessor may charge less overall as a consequence, he or she will no longer have to worry about the day-to-day administration of that property. They come in 3 main categories: single, double, or triple net leases, based on the way the fees are structured.
Inside the NETL ETF
Investors looking to participate in net leases using ETFs can look at an ETF like the NETLease Corporate Real Estate ETF (NETL).
The NETLease Corporate Real Estate ETF tracks a market-cap selected and weighted index of net lease U.S. real estate equities, and is a product of Exchange Traded Concepts, a large ETF company. The NETL ETF is uniquely focused entirely on Net Lease Real Estate Investment Trusts (REITs), which is one of the fastest growing sectors within the REIT space.
This pure-play Net Lease REIT ETF encompasses a variety of REITs that provide sustainable cash flows by leasing their properties through long-term contractual leases on a triple-net lease basis. The leases have terms that are generally 10 years or longer, predetermined rental rate increases, and minimal landlord responsibilities.
“We are thrilled to be working with the Fundamental Income team to bring this timely and innovative fund to market,” said J. Garrett Stevens, CEO of Exchange Traded Concepts. “This Fund tracks the Net Lease real estate sector, which exemplifies consistent and predictable cash flows that Net Lease REITs derive from a diverse portfolio of corporate-leased properties. Great colleagues and great ideas are the true drivers of ETF success,” continued Stevens. “We’re very pleased to add Fundamental Income and NETL to our growing list of affiliates and innovative ETF solutions.”
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