Need Inputs On CRE Net Leases (NNN)
I am a new CRE investor and would like to get into commercial landlording, so some of my questions might seem stupid. I am looking to buy a NNN property and I have these questions for anyone who knows this stuff:
1) Are there any special considerations
(caveats or gotchas) when buying a NNN property?
2) Since NOI is the main thing that decides the price (my guess), what percentage of the price should the land/structure be worth?
3) What if I took a loan and bought such a property with a long-term lease, and few months/years later the tenant wants out (prior to the term end) ?
4) Are there typically any deposit monies and/or legal terms that need to be in the contract which will protect my interest as a landlord (financially and legally)?
5) Is it too risky (being a new CRE investor) to get into something like this?
TIA !!
Sam
Triple net leases are an extremely easy property to figure out. Your main risk is that the tenant doesnt renew the lease at the intervals of lease term, or goes out of business. If either of these happens it is an extremely hard feat to get a new tenant so plan ahead by having a huge buffer of monies to ride out any vacancies. There is usually a cost to the tenant in the contract should they break the lease, but if they are going out of business, good luck collecting.
For something of this magnitude I would highly suggest getting a lawyer as you will need to know all the intricacies that are involved in the contract. Each contract is different so there is no way to tell you deposit information.
It can be an excellant way to make money over a long term as long as you choose the right tenant and set up the right contract. The difference between choosing the right client like Best Buy or the wrong one like Ames can make or break you. My advise is that you do your homework, have a large nest egg set aside and get a good lawyer.
Good Luck,
Kyle
Quote:
On 2003-07-31 19:13, samberry wrote:
I am a new CRE investor and would like to get into commercial landlording, so some of my questions might seem stupid. I am looking to buy a NNN property and I have these questions for anyone who knows this stuff:
1) Are there any special considerations
(caveats or gotchas) when buying a NNN property?
2) Since NOI is the main thing that decides the price (my guess), what percentage of the price should the land/structure be worth?
3) What if I took a loan and bought such a property with a long-term lease, and few months/years later the tenant wants out (prior to the term end) ?
4) Are there typically any deposit monies and/or legal terms that need to be in the contract which will protect my interest as a landlord (financially and legally)?
5) Is it too risky (being a new CRE investor) to get into something like this?
TIA !!
Sam
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My Comments on NNN:
1. Cap rates are too low today
2. Interest rate rise will hurt return - so make sure your rate is locked for a while
3. Good conservative investment
4. CONCENTRATE on the quality of the tenant
5. CONCENTRATE on the quality of the tenant.
[addsig]
The three most imporant factors to consider when purchasing a NNN leased investment are:
1.) Strength of the tenant
2.) Length and terms of the lease
3.) Location of the investment
Feel free to contact me via e-mail and I can further explain each factor. I deal with these investments all the time.
Regarding all the advice above to focus on the tenant...
I have read that it is not out of line to actually request current financials from the tenant when considering such a purchase. Of course, the tenant is not obliged to assist you, but it doesn't hurt to ask.