Real Estate Investing Isn’t Passive — But This Is as Close as It Gets

04/29/2025

Industry Insights

Introduction

“Passive income” is a popular catchphrase in real estate, but the truth is that owning property usually involves active work. Traditional landlords deal with tenants, maintenance calls, and hands-on management. However, there’s one niche in commercial real estate that comes very close to being truly passive: triple net lease investments. In a triple net (NNN) property, the tenant handles most expenses and upkeep, leaving the owner with little to do beyond collecting rent. This article explores why NNN properties — especially those leased to quick-service restaurants and big-box retailers — are about as hands-off as real estate gets. We’ll also examine what responsibilities still remain for the landlord, how the landlord–tenant relationship works in these deals, and how NNN investing compares to other passive strategies like REITs, funds, DSTs, and online platforms. Finally, we’ll overview the key professionals that help make “passive” real estate investing possible.

Triple Net (NNN) Leased Properties: The Passive Appeal

A triple net lease is a lease structure where the tenant agrees to pay not just rent, but also the property’s operating expenses — including property taxes, building insurance, and maintenance costs. For the landlord, this means far fewer bills and responsibilities. NNN leases are common in U.S. commercial property, particularly in the retail sector. These deals are especially prevalent with quick-service restaurants (QSR) like fast-food chains and big-box retail stores. Such tenants often sign long-term leases and handle most property expenses themselves. Many QSR brands are franchise-operated, and the franchise sector overall continues to expand (as noted by the International Franchise Association). Each new franchise location often means a new tenant business seeking a site, which helps drive demand for NNN-leased properties across the country.

Investors are drawn to NNN properties because they offer real estate income with minimal management. Key benefits include:

Minimal Landlord Duties: Because the tenant covers taxes, insurance, and upkeep, the owner doesn’t have to handle day-to-day property issues or pay those routine expenses. There’s no need for the landlord to arrange lawn care, fix leaky faucets, or deal with utility bills — the tenant takes care of those.
Stable, Long-Term Income: NNN leases typically run 10–20 years (often with additional renewal options), providing predictable rent checks for many years. QSR and big-box tenants tend to be committed for the long haul; they invest significant capital into each location (kitchen build-outs, specialized layouts, etc.), so they want to stay and recoup that investment over time. This long-term occupancy means less risk of turnover and vacancy for the landlord.
Creditworthy Tenants: Many net-leased retail properties are occupied by nationally recognized brands or large franchisees. These tenants often come with corporate guarantees on the lease, essentially backing the rent with the strength of a major company. For the landlord, a high-credit tenant (such as a well-known fast-food chain, pharmacy, or big-box store) greatly reduces the chance of default. It’s somewhat analogous to having a bond – the income feels secure due to the tenant’s financial stability.
“Mailbox Money” Convenience: The hands-off nature of NNN investing has earned it nicknames like “mailbox money,” implying the checks just show up while you do very little. In reality, most rent these days is electronic, but the idea stands: a properly structured absolute NNN lease can require almost no intervention from the owner during the lease term. It’s about as close to a set-and-forget investment as owning real estate can be.

All these factors make NNN properties attractive to investors who want real estate exposure without the usual landlord headaches. It’s no surprise that demand for single-tenant net-lease assets has been strong in recent years. For example, CBRE reported rising investment volumes in the net-lease sector in 2024, reflecting their enduring appeal, and research by NAIOP highlights the stability of these income-focused investments. In short, NNN properties offer consistency and simplicity — a combination that’s very appealing from a passive-investor perspective.

Landlord Responsibilities in NNN Leases

While NNN ownership is low-maintenance, “passive” doesn’t mean “no responsibility.” Even in an absolute NNN lease (where the tenant handles everything, potentially including repair of the roof and structure), the landlord still has a few duties:

Lease Administration: The owner must monitor the lease terms – for instance, tracking that rent is paid on time and that any scheduled rent increases or percentage rent (if applicable) are correctly applied. If the lease includes renewal option windows or an expiration date down the line, the landlord needs to keep those on the radar. Well in advance of lease expiration, an NNN owner will decide whether to approach the tenant about renewing or plan to market the property/new lease to a different tenant.
Oversight of Expenses: In a standard NNN deal, the tenant directly pays property taxes, insurance premiums, and maintenance costs (or reimburses the landlord for them). The landlord should ensure those critical expenses are indeed being paid. For example, if a tenant is supposed to pay the property tax bill directly to the county, it’s wise for the owner to verify payment each year to avoid liens. Similarly, the landlord may request proof of insurance coverage annually to confirm the tenant has kept the required policies in force naming the owner as an additional insured.
Occasional Maintenance or Capital Costs: Some “modified NNN” leases require the landlord to cover certain big-ticket items — typically structural components like the roof, foundation, or HVAC replacement. If a major repair is needed and it falls outside the tenant’s obligations, the owner will have to arrange (and pay) for it. In practice, absolute NNN leases push 100% of upkeep to the tenant, whereas a double-net lease might leave roof and structure with the owner. An NNN investor should know where their responsibilities lie and be prepared for a rare but possible capital expense. This might involve hiring a contractor for a new roof or parking lot resurfacing at some point during a long lease.
Financial & Legal Management: NNN investors still have to handle the financial side of ownership. This means maintaining books, filing taxes on the rental income, and possibly making mortgage payments if the property is financed. Engaging a CPA is common to take advantage of depreciation benefits and ensure tax compliance each year. Likewise, a real estate attorney may be needed for occasional tasks such as reviewing lease amendments, advising on default remedies if a problem arises, or handling the closing when you eventually sell. These professional services (accounting, legal, etc.) are typically the landlord’s responsibility (and cost) – they aren’t passed on to the tenant.
Exit Strategy Planning: Eventually, even a long-term lease will end, or the investor may want to liquidate the asset. Planning an exit is an active responsibility for the owner. If you intend to hold long-term, you’ll need to find a new tenant when the current one leaves (or if they go dark early, in a worst-case scenario). That means engaging a broker to market the property for lease, negotiating a new lease, or perhaps repurposing the building for a different use. Alternatively, if selling the property, the owner will coordinate the sale (often using a broker) and consider taxes – many NNN investors utilize a 1031 like-kind exchange when selling, which involves working with a qualified intermediary to smoothly roll the proceeds into a new investment and defer capital gains tax.

The key point is that NNN investors don’t deal with daily property hassles, but they must still mind the business side of ownership. It’s prudent to keep organized records of the lease and all pertinent documents, and to check in on the asset periodically. For example, an owner might do an annual drive-by or visit to ensure the property remains in good condition, or at least review photos and maintenance reports from the tenant. While the “hands-on” burden is very light compared to other types of real estate, a successful passive landlord stays vigilant about the financial and legal details that keep the investment running smoothly.

Landlord–Tenant Relationship in NNN Deals

In a triple net retail lease, the landlord–tenant relationship is much more hands-off than in residential rentals or multi-tenant commercial properties. The tenant, often a business operator or national chain store, is largely self-sufficient in managing the property. They pay all the bills they’re responsible for, maintain the premises, and operate their business – all while sending rent to the landlord per the lease schedule. For the most part, the tenant only contacts the landlord for major items or approvals as required under the lease.

Communication between the parties tends to be infrequent but professional. Common touchpoints include:

Lease Compliance and Requests: If the tenant needs approval for something outside of ordinary operations – say, renovating the store, adding a new signage package, or subleasing/assigning the lease to another approved entity – they will reach out to the landlord as specified in the lease. The landlord’s role is to evaluate and consent to such requests (often not unreasonably withheld, per typical lease language). These interactions are relatively rare and are usually handled in writing.
Property Condition Updates: A responsible NNN tenant takes care of maintenance and might not need to inform the landlord about every routine repair. However, if there’s a significant issue (for example, a roof leak in a scenario where the landlord is responsible for the roof), the tenant will notify the owner to get it addressed. Conversely, some landlords like to perform a periodic check-in — perhaps an annual property inspection or a casual site visit — just to be sure the asset is being kept up. In a good landlord–tenant relationship, these check-ins confirm that the tenant is fulfilling their maintenance duties and the property is in good shape.
Rent and Financial Notices: Rent in an NNN lease is usually a fixed amount that increases at agreed intervals, so there’s not much need for discussion as long as payments are made. If a payment is missed or late (which is uncommon with strong commercial tenants), the landlord would issue a notice of default or late payment per the lease terms. Additionally, if the lease involves any year-end reconciliation of expenses (common in multi-tenant situations, less so in single-tenant NNN), there might be an exchange of expense statements. In most single-tenant NNN cases, though, the financial interactions are simply the tenant paying rent and the landlord quietly receiving it.

Overall, the NNN arrangement sets clear expectations: the tenant focuses on running their business and looking after the property, while the landlord is a mostly passive recipient of rent. It’s a “no news is good news” scenario — months can go by without any direct contact. Still, maintaining a cordial and responsive relationship is important. If something does come up that requires landlord involvement, a positive relationship can make resolution easier. Moreover, when the lease term nears its end, a tenant who has had a good experience (and whose business is doing well at that location) is more likely to renew, which benefits the landlord. In summary, an NNN landlord’s interaction with the tenant is limited, but when it does occur, it centers on lease compliance and preserving the property’s condition and income stream.

Alternative Passive Commercial Real Estate Strategies

Directly owning a NNN property is one way to enjoy a low-effort real estate investment, but it’s not the only route. Investors who want exposure to commercial real estate without the hassles of direct ownership can consider several other strategies. These options vary in their degree of passivity and the level of control an investor has to give up:

Investing through REITs (Real Estate Investment Trusts)

REITs allow individuals to buy shares in a large, professionally managed real estate portfolio. Publicly traded REITs are listed on stock exchanges and might own hundreds of properties across various markets – for example, a REIT could specialize in net-leased retail stores, apartments, warehouses, or a mix of sectors. For an investor, buying into a REIT is as passive as investing in any stock: you purchase shares and receive dividends (REITs must distribute most of their income to shareholders by law). All the property management, tenant dealings, and strategic decisions are handled by the REIT’s management team.

This approach offers ultimate convenience and liquidity. You can enter or exit your investment simply by buying or selling shares on the market, and you don’t need a large amount of capital to get started (even a few hundred dollars can buy a diversified slice of a REIT). It also provides instant diversification – since a single REIT might own dozens of NNN properties rather than you putting all your money into one fast-food restaurant, for instance. The trade-off is zero control at the property level. You have no say in which properties the REIT acquires, how it negotiates leases, or when it sells assets. Additionally, public REIT share prices can be volatile, moving with the stock market and interest rate expectations. So while you avoid the work of being a landlord, you must accept the market fluctuations and trust the REIT’s management to make good decisions. (There are also private and non-traded REITs, which aren’t on the stock exchange – those eliminate daily price volatility but instead lock up your money for a period. They are still very passive, operating in the background while you receive periodic distributions.)

Private Real Estate Funds & Syndications

Another path to passive income is to invest as a limited partner in a private real estate offering. These can take the form of a real estate fund (where a sponsor pools investor money to buy a portfolio of properties) or a syndication (a one-property deal where investors collectively fund the purchase of a specific asset). In either case, you contribute capital and the sponsor or general partner handles all the active duties. This might include finding and buying properties, arranging financing, dealing with tenants, and eventually selling the assets.

Like REITs, private funds offer a passive experience for the investor – you won’t be dealing with any tenants or property issues yourself. The sponsor will typically send out updates (e.g. quarterly reports) and distribution checks from operating income (e.g. your share of rents after expenses and debt service). Importantly, investors in such deals usually have no decision-making power in the day-to-day management. You are truly along for the ride. In some cases, major decisions (like selling a property or refinancing) might require a vote of the investors, but even then, you’re one of many voices and the sponsor’s recommendation usually carries the day. In most scenarios, the sponsor has discretion to run the show as they see fit.

The potential benefits of these private investments include access to opportunities and expertise you might not have on your own. For example, a real estate fund could give you exposure to a dozen office buildings or shopping centers with one investment, or a syndication might allow you to own a piece of a high-quality apartment complex managed by an experienced operator. Returns can vary widely depending on the strategy – some funds aim for high yield from stable assets (similar to NNN yields), while others pursue value-add or development gains, which carry more risk and reward. What they share is the passive nature for the investors and the lack of liquidity. When you invest in a private fund or syndication, your money is typically tied up for several years until the business plan plays out and properties are sold or refinanced. There’s also an element of trust required: you need confidence in the sponsor’s competence and integrity, since you won’t have control to change course if something goes awry. Nonetheless, for those who want to be hands-off, investing in a reputable real estate fund or syndicate can provide solid returns without any landlord duties.

Delaware Statutory Trusts (DSTs)

DSTs are a specialized form of passive real estate ownership often used by investors looking to defer taxes via a 1031 exchange. A Delaware Statutory Trust is a legal entity that holds title to investment real estate and allows multiple investors to own fractional interests in that property (or a portfolio of properties). The unique appeal of a DST is that the IRS treats an investment in a DST as direct ownership of real estate for 1031 exchange purposes. This means an investor can sell a property they actively managed, then reinvest the proceeds into a DST to maintain tax deferral – effectively swapping into a passive ownership structure.

In a DST deal, a sponsor company acquires a property (say, a set of NNN-leased stores or an apartment building) and sets up the trust. Investors then buy shares of the trust, providing the equity capital that the sponsor used to purchase the asset. From the investor’s perspective, once you place your money into the DST, your work is done. The sponsor manages the property (often hiring professional property management), handles the financing and eventual sale, and makes periodic distributions to investors from the rental income. DST rules actually prohibit the investors from having active management authority – you have no voting rights or say in property operations. This is to ensure the DST remains a passive investment vehicle (and complies with IRS guidelines).

The benefits of DSTs include truly hassle-free ownership and the ability to invest in high-quality commercial properties that might be too expensive to buy on your own. They are especially popular for those who are tired of being landlords but don’t want to cash out and pay capital gains tax – by going into a DST, they keep their capital working in real estate without lifting a finger to manage it. DSTs typically provide steady, modest income (since the properties are often stable, low-risk assets like net-leased supermarkets, medical offices, or multi-family complexes). On the downside, because you have no control, you have to be comfortable with the sponsor’s plan and the property’s long-term prospects at the time you invest. There is also very limited liquidity (usually you must wait until the sponsor sells the property, which could be 5–10 years). But for investors prioritizing ease and tax efficiency, DSTs are as passive as it gets – you enjoy the income and tax benefits, and the sponsor handles everything behind the scenes.

Online Real Estate Investment Platforms

The rise of online real estate platforms has further expanded access to passive real estate investing. Websites and fintech companies now offer marketplaces where individuals can invest in commercial real estate projects with relatively small amounts of capital. Examples include crowdfunding platforms and real estate investment apps, where you might browse a list of property offerings – such as an office building renovation, a new hotel development, or a pool of single-family rentals – and choose to invest a few thousand dollars into one or more deals.

These online platforms are essentially modern intermediaries connecting investors with real estate sponsors seeking capital. Once you invest through a platform, your role is typically limited to waiting for updates and distributions. The sponsor (or the platform’s own management team) handles the property business plan. Some platforms offer investments in the form of eREITs or managed funds (where the platform itself aggregates properties and you buy shares – similar to a non-traded REIT, but offered online to retail investors). Others present individual project syndications hosted on their site, and you become one of many limited partners in an LLC that owns the property.

From a passivity standpoint, online investments are much like any other private fund or REIT: you’re not dealing with tenants or toilets, and you likely have no managerial control. The main difference is the ease of access and often the lower minimum investment, which can democratize real estate investing. Instead of needing $500k to buy a single NNN building, an investor could put $5k into a crowdfunding deal that owns part of a shopping center, for instance. It’s important to note that while these platforms make investing easier, the underlying risks and illiquidity remain – you still need to evaluate the deal’s merits and understand you might not be able to withdraw your money until the project is completed or sold. In short, online platforms provide another avenue to earn passive real estate income, sitting somewhere between direct ownership and public REITs. You get the benefits of property investment without day-to-day responsibilities, but you also assume the risks of the specific deals you choose, and you entrust the execution to someone else.

Comparing Levels of Passivity and Control

With all these models in mind, it’s helpful to compare how they stack up in terms of passivity (how hands-off an investor can be) versus control (the ability to influence the investment). Here’s a quick overview:

Direct NNN Property Ownership: You have full ownership and decision-making power over the asset. This gives you the most control – you pick the property, approve the tenant and lease terms, and decide when to refinance or sell. On a day-to-day basis, your involvement is minimal (especially with an absolute NNN tenant handling all upkeep). However, if something goes wrong (tenant default, or needing to fill a vacancy at lease end), you are the one who must take action. There’s also concentration risk since your income depends on a single tenant/property. Passivity level: Moderate. (Very low effort during stable times, but you remain the active principal overseeing the investment.)
Private Passive Investments (Funds/DSTs/Syndications): You own an economic share of one or more properties through an intermediary entity. You do not control property-level decisions – the general partner or sponsor manages everything. You typically cannot sell your stake until the sponsor executes the exit (which could be years out). In exchange for giving up control and liquidity, you get professional management and potentially a diversified or institution-grade asset. Passivity level: High. (You have almost no responsibilities beyond initial due diligence and then reading the occasional investor report.)
Public REITs: You hold shares in a large, diversified real estate company. You have no direct control over the properties or operations (aside from voting on broad corporate matters). This is the most hands-off approach – you’re one of thousands of investors and the day-to-day management is fully out of your hands. You can, however, control when you buy or sell your shares on the stock market. Diversification spreads out the risk of any single tenant or property issue affecting your income dramatically. Passivity level: Very High. (It’s as passive as investing gets, but it comes with the least control and is subject to market fluctuations.)

No approach is “best” for everyone – it really depends on an investor’s priorities. If you value control and the specific benefits of owning real estate (like choosing your exact assets and potentially reaping a larger share of appreciation), direct ownership of NNN properties might appeal to you, accepting a bit of active oversight when needed. If you prefer pure ease and diversification, REITs or professionally managed funds might be better, understanding you’ll have little say in the process. Many investors use a mix: for instance, holding one or two NNN properties for stable income and control, while also investing in REITs or DSTs to supplement with truly passive, diversified exposure. The key is that commercial real estate offers a spectrum of involvement, and you can position yourself where you’re most comfortable on the passive-to-active scale.

Key Stakeholders in Commercial Real Estate Ownership

Even passive-style real estate investments benefit from having the right team of people involved. As an investor, you’ll likely work with several key stakeholders who help you find opportunities, close deals, and keep things running smoothly. Some of the important players include:

Commercial Real Estate Broker: A broker helps you source and evaluate properties. If you’re looking for a NNN investment, a broker can identify listings that meet your criteria (location, tenant quality, lease terms, price range) and guide you through making an offer. Brokers also assist in negotiations and due diligence. Later, if you decide to sell, a listing broker will market the property to find a buyer. In short, brokers are your eyes and ears in the market and facilitate transactions, which is invaluable for finding good passive investments.
Real Estate Attorney: An attorney is essential for the legal side of investing. They review and draft contracts such as the purchase and sale agreement when buying a property, and they scrutinize the lease documents. In an NNN deal, an attorney’s review of the lease is crucial — you want to be certain that the lease clearly spells out the tenant’s responsibilities for expenses and maintenance, and that there are protections for the landlord. Attorneys also help with entity formation (e.g., setting up an LLC to hold the property) and can advise on any legal issues that arise during ownership. Having a good attorney helps prevent costly mistakes and ensures your passive investment is built on solid legal ground.
Certified Public Accountant (CPA): A CPA or tax advisor helps structure the investment for tax efficiency and handles tax reporting. Real estate in the U.S. comes with tax benefits like depreciation, which can shield some of your rental income from taxes — a CPA will calculate and apply this properly. They’ll also advise on issues such as 1031 exchange rules, the tax implications of income from a REIT or DST, and ensure you’re filing all required state and federal returns for your investment entity. Essentially, a CPA makes sure that you keep as much of that “passive” income as legally possible and that you remain in compliance with tax laws year to year.
Lender or Mortgage Broker: If you use financing to purchase a commercial property, the lender becomes a key partner in the deal. A mortgage broker can help shop for the best loan terms for a net-lease property (banks often love NNN deals with strong tenants, so rates and terms can be favorable). While taking a loan means you’ll have to make monthly debt payments, it also can increase your overall return on equity through leverage. Working with a lender involves some ongoing interaction — e.g., providing financial statements or property rent rolls annually, complying with insurance requirements, etc. However, for a stable NNN property, this relationship is pretty low-maintenance after closing. The lender’s stake in the deal (the mortgage) just means you need to keep the property income sufficient to cover the loan and follow any loan covenants. A good lender will work with you to ensure the financing remains healthy throughout your ownership.
Contractor/Inspector: Before buying a property, you will hire inspectors and maybe specialty contractors (roofers, plumbers, environmental consultants) to assess the asset’s condition – this is part of your due diligence. They help identify any potential physical issues or future costs. In an NNN scenario, you likely won’t need a contractor frequently after purchase, since the tenant handles most maintenance. But it’s wise to have a go-to contractor on call for the unexpected. For example, if the tenant reports a structural issue that falls under your responsibility, you’ll want a trusted professional to evaluate and fix it. Also, when the time comes to sell or re-tenant the building, a contractor might be needed to do minor work (say, repainting or roof touch-ups) to get the property in top shape. Essentially, contractors and inspectors help protect your investment’s physical integrity, even if their services are rarely needed in a passive NNN context.
Property or Asset Manager: For a single-tenant NNN property, you might not need a property manager in the traditional sense, because the tenant is doing the day-to-day upkeep. However, some investors, especially those with multiple properties, hire an asset manager or management firm to handle administrative tasks. This can include collecting the rent, keeping records of insurance/tax payments, reminding the owner of key dates (like lease renewals), and being the primary contact for the tenant (so the owner isn’t bothered at all). Essentially, the asset manager provides an extra layer of passivity – they make the owner’s involvement almost zero. Of course, this service comes at a fee, so many single-property owners don’t use a manager since the effort required is already small. But it’s a stakeholder to consider if you truly want to outsource every aspect of managing your real estate investment.
1031 Exchange Intermediary: This stakeholder comes into play when you’re selling a property and aiming to use the proceeds to buy another property (or DST) without paying capital gains tax. Under Section 1031, you can defer taxes by exchanging into a “like-kind” property, but you must use a Qualified Intermediary (QI) to facilitate the process. The QI holds the sale funds in escrow and coordinates the paperwork between your sale and your subsequent purchase. They are crucial in ensuring all IRS rules are followed (such as the tight timelines to identify and close on a replacement property). The intermediary is typically involved only during the transaction window of the exchange, but their role is vital for preserving your investment capital. If you’re treating real estate as a long game – moving from one investment to another over the years while deferring taxes – a good 1031 intermediary is an important partner whenever you decide to “trade up” your passive investment for another.

By assembling a solid team of professionals, an investor can truly make real estate investing feel passive. The broker finds you the right opportunity, the attorney and inspector ensure it’s a good deal, the lender boosts your buying power, and the CPA optimizes your finances. Down the line, if you need to transition the investment, the intermediary and broker step in again. Each expert handles their piece of the puzzle, allowing you as the owner to focus on high-level decisions and enjoy the income. This highlights an important nuance: even “passive” investments benefit from active oversight – it just doesn’t have to be your labor if you leverage experts. In the end, real estate is a team sport, and having the right stakeholders involved turns what could be a job into more of a hands-off financial holding.

In summary, real estate investing will always require some level of engagement, but choosing the right approach can minimize the hassle. Triple net leased properties offer the convenience of near-passive ownership with the tangible benefits of direct property investment. Meanwhile, options like REITs, funds, DSTs, and online platforms provide avenues to earn real estate income with virtually no involvement in operations. It’s all about aligning your investment choice with your desired level of control and effort. With a clear strategy and the support of qualified professionals, you can enjoy steady real estate income that truly feels as easy as collecting a check in the mail.