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Two buildings can collect identical rent and support very different loans, because the lease decides who pays for the taxes, the insurance, the maintenance and the roof. Before anything else in a file, a lender works out which expenses actually reach the owner.

The structures

Gross leases leave operating costs with the landlord; modified gross splits them; triple net pushes taxes, insurance and maintenance to the tenant; absolute net leaves the tenant with structure and capital items too. Percentage rent adds a share of sales on top of a base.

Why it moves proceeds

Net operating income, not gross rent, services the debt. A gross lease at a headline rent can underwrite below a triple-net lease at a lower one.

Read the actual document

Expense stops, caps on recoveries, base-year resets and landlord obligations buried in the maintenance clause routinely change the real NOI by more than a rent negotiation would.

Our minimum loan is $200,000. We are a direct commercial lender working across the 43 states we serve, in business since 1998. We do not publish a rate for this product because the number depends on the file — call and we will quote the deal in front of us.

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Commercial Lease Guide

NNN vs. Gross vs. Modified Gross vs. Percentage Leases:
What Every Texas Commercial Investor Must Understand

The type of lease on a commercial property changes everything — your cash flow predictability, your expense exposure, and how lenders underwrite the NOI. Here's a plain-English breakdown of each structure.

NNN

Triple Net Lease

Tenant pays base rent + taxes + insurance + maintenance
Investor Favorite

The holy grail of commercial leases for passive investors. The tenant pays a base rent (lower than gross lease) plus all three "nets": property taxes, building insurance, and CAM (common area maintenance / structural repairs). The landlord receives a predictable, nearly-expense-free income stream.

Expense
Landlord Pays
Tenant Pays
Base Rent
Receives
Pays
Property Taxes
Tenant
Pays ✓
Building Insurance
Tenant
Pays ✓
Maintenance/CAM
Tenant
Pays ✓
Structural Repairs
Sometimes
Varies

Best for: Single-tenant retail (gas stations, pharmacies, fast food, dollar stores), long-term leases with creditworthy national tenants. NNN tenants are often corporate entities with 10–20 year leases. The "passive income" ideal.

Example: Walgreens NNN lease — tenant pays $18,000/month base rent + all taxes, insurance, and maintenance. Landlord receives $18K/month with near-zero operating expense. At a 5.5% cap rate on a $3.9M property, this is a pure income play.
Gross

Full Gross Lease

Tenant pays one flat rent — landlord pays all expenses
Most Common

The simplest lease structure: tenant pays one flat monthly rent. The landlord pays all operating expenses — taxes, insurance, maintenance, and utilities. Tenant has maximum cost predictability. Landlord absorbs all expense variability. Common in office buildings and multi-tenant retail.

Expense
Landlord Pays
Tenant Pays
Base Rent
Receives
Pays
Property Taxes
Pays ✗
—
Building Insurance
Pays ✗
—
Maintenance/CAM
Pays ✗
—
Utilities
Often pays
Sometimes

Best for: Multi-tenant office, co-working space, smaller retail where tenants expect all-inclusive rent. Landlord takes on expense risk but can charge higher base rent to compensate. Lenders will underwrite NOI carefully since expenses are variable.

Example: 10,000 SF office building. Gross rent = $25/SF = $250,000/yr. Landlord pays $80,000 in taxes, insurance, and maintenance. Net to landlord: $170,000 NOI. Compare carefully to NNN where tenant carries those costs.
MG

Modified Gross Lease

Split expenses — negotiated case by case
Most Flexible

A hybrid between gross and NNN where expenses are negotiated individually. Tenant pays base rent plus some expenses (often utilities, sometimes taxes); landlord retains liability for others (often structural). The exact split depends entirely on lease negotiation. Common in industrial and flex space.

Expense
Who Pays
Notes
Base Rent
Tenant
Usually lower than gross
Property Taxes
Negotiated
Often landlord
Insurance
Negotiated
Varies by deal
Utilities
Typically Tenant
Most common tenant cost
Roof/Structure
Usually Landlord
Big-ticket items

Best for: Industrial properties, flex/tech office, smaller local tenants who need cost predictability on some items. Investors should carefully model which expenses they retain before underwriting the NOI.

Example: 5,000 SF warehouse. MG lease: tenant pays $8,500/month + utilities + their own liability insurance. Landlord pays property taxes and roof/structure. NOI is predictable but landlord retains tax exposure.
%

Percentage Lease

Base rent + percentage of tenant gross sales
Retail Only

A retail-specific structure where the tenant pays a base rent plus a percentage of their gross sales above a "natural breakpoint." Common in shopping centers, malls, and high-foot-traffic retail strips. Gives the landlord upside participation in tenant success — but also creates income variability.

Component
Structure
Example
Base Rent
Fixed monthly
$4,000/month guaranteed
Natural Breakpoint
Base ÷ % Rate
$4,000 ÷ 6% = $66,667/mo in sales
Percentage Rent
Above breakpoint
6% of sales > $66,667/mo
Expenses
Varies (often NNN)
Combined w/ NNN frequently

Best for: Shopping center landlords with anchor-tenant draws. Percentage rent aligns landlord and tenant — the tenant succeeds, the landlord benefits. Lenders will underwrite to base rent only (not percentage rent) when evaluating NOI — conservative and correct.

Example: Boutique gym chain at $4,000 base + 5% of monthly revenue over $80,000. In a strong month ($150K revenue), tenant pays $4,000 + $3,500 = $7,500. In a slow month, just $4,000. Lender will qualify the loan on $4,000/month base only.
FactorNNNGrossMod. GrossPercentage
Landlord expense riskLowHighMediumMedium
NOI predictabilityHighMediumMediumLow
Lender preferenceHighestMediumMediumLowest
Passive income qualityBestGoodGoodVariable
Common property typeRetail/NNNOfficeIndustrialMall/Center

Financing the Right Property for Your Lease Structure

We underwrite to the income the property actually produces — regardless of lease type. Submit your deal and we'll structure the loan around your actual NOI.

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