Transition from Multi to NNN Medical- Comment Please
Have done 10+ rehab and rents. Created a lot of equity. In process of several 1031 exchanges into medical office buildings in particular. Just want thoughts on medical office vs retail, regular office, industrial etc. what do you prefer and why only if you own something?

Positives and negatives of medical, again please only post if you actually own medical buildings and have experience.

Multi family housing is a lot of work and I’m betting NNN investing is much easier. We shall see. Thoughts?
[{"id": "f72dbro", "text": "What kind of cap rates have you been seeing in the NNN medical space?", "replies": [], "depth": 1}, {"id": "f72dbrq", "text": "In May I purchased a suburban medical office building, 14,000sf. We were able to get it at a 9.5% cap rate because 2 months after closing a majority of the tenants left (various unrelated reasons). We are now in the process of getting the building leased up (I am also the listing agent for the building and property manager). We have not had the building for long so take this with as much weight as you want. For background also we own multiple strip centers (over 100,000 sf) and a traditional office building. \n\nFirst the existing tenant. Even though they have a NNN lease, they call me for everything first. Most likely because I actually pick up my phone instead of having to wait 2 weeks for facilities to get to the site. \n\nLeasing: \nIn my area it costs $250/sf to put in a dentist. The TIs are expensive. \nIt is slower then traditional retail. For normal retail a site has a large variety of potential clients. For medical office that list is significantly shorter. \nMedical office doesn\u2019t like to move. Once they get in they typically stay in. \nSince medical office tends to stay in once in place since the TIs are so high, it is hard to convince a tenant to move from one building into yours, even if your is a significantly better space. \n\nThose are my thoughts on the past few months. Let me know if you want clarification or more info on anything. Good luck! Medical office can be a very stable investment, once you get them in.", "replies": [{"id": "f73mcnb", "text": "\\+1\n\nGreat synopsis. Run a facility well and NNN is never management free when the tenant isn't credit..... Unless it's truly single tenant. I have some buildings that I genuinely never have to look at again. Those are the ones I sell.\n\n  \n\n\nDentists have the lowest business failure rate after funeral homes. They're worth the TI. But they are very plumbing intensive. I get strong cap rates doing less work. But everyone's game is different. I am starting to look into residential very hard, the antithesis of my MO for my entire career. Grass is always greener.", "replies": [{"id": "f73rrir", "text": "Newer generation of dental equipment now is self-contained. No plumbing.  \ud83d\ude42", "replies": [{"id": "f73sxdt", "text": "Thats actually great. 2nd gen pads are still shopping for a good premium in NYC\n\nDid you handle an install. I may want to look into prebuilds for some of my sites.", "replies": [{"id": "f73thnx", "text": "ASI dental does a lot of them.  https://asidental.com/portable/", "replies": [{"id": "f73uml8", "text": "Any idea on pricing per unit?", "replies": [{"id": "f7dgui8", "text": "Sorry no clue", "replies": [], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "f75p3bj", "text": "Great info, and is buying this type of building something anyone with a little cash on hand can do? Or does it take hundreds of thousands to even begin to think about?", "replies": [{"id": "f75wez2", "text": "Location location location\n\nNY/NJ/Miami: nothing below 3MM to be honest.\n\nI could get into it deeper. But in short. Very high barriers to entry anywhere. But it really depends what you are looking for and what you want to do/make.\n\n  \n\n\nYou can always buy a REIT.", "replies": [{"id": "f76no1w", "text": "interesting, im in chicago. But yeah that REIT thing keeps popping up on this board and I have almost no clue how it works. Have you had any experiences with any REIT? From what I can understand so far,  prospective client would pay a group of people to own and manage property, and the client in return would get a small percent of the profit? Or am I completely way off", "replies": [{"id": "f76o6im", "text": "A REIT is a real estate investment trust.\n\nOne company with 50 or more investors which pours it's profits into dividends and purchasing more properties\n\nSo if you like an asset class, you can buy the shares on robin good. Vornado (VNO) do office bldgs and retail. Simon property group do malls. The empire State building is a REIT in and of itself.\n\nSome pay dividends as high as 8% and have been really stable. Some may be better. I have a partner who's bought them and done great, I've bought actual real estate.\n\nIf you like the idea of medical, but can't enter, just Google \"medical REIT\". There's going to be a bunch.", "replies": [{"id": "f77qsq9", "text": "Oh ok so lets say I get into Simon property group and next year its 8%, but 8% of what amount?", "replies": [{"id": "f77s1h4", "text": "The stock price\n\nBut they aren't. They're like 3-5\n\nSmaller guys are 8\n\nYou have to look. That's the extent of my knowledge", "replies": [], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "f73mhlo", "text": "I have a B class building in Providence, RI, 9,000 square feet. In good shape. A lot of exams rooms, common receptionist area etc on each floor. Shouldn\u2019t require a crazy build for most tenants. First floor has 9 years left on the lease, top floor has 2 and may move out (most likely will) so I got it at a 10.5 cap.\n\nSecond building is suburban, 5 year NNN tenant and 2 years left of a chiropractors gross lease that is 50% below market because the owner needed him to move from one side of the building to the other which gave that tenant leverage. Got that at a 9.5 cap.\n\nBoth buildings have a small blood lab on a gross lease. The first building has no drag on CAM though so it\u2019s a true NNN.\n\n***Thoughts on build out costs and how often in general tenants churn for MOB because I feel like they stay for decades typically. ***\n\nTenants are doctors that sold to a larger company to retire and then new doctors just stepped in the pick up the book of business so the tenants a revert credit worthy (not a doc in the box).", "replies": [], "depth": 2}], "depth": 1}, {"id": "f72ehvj", "text": "I\u2019ve owned and managed mfr, office and MOB. \n\nMFR and office are two totally different animals. Office can be less management intensive but there are other risks. It can be more capital intensive (especially with specialty uses like MOB where if a tenant turns over or is renewing and is looking for significant tenant improvements or refreshed space) and you allude to NNN as if it\u2019s Absolute Net and I just want to point out that it\u2019s not. You need to read the leases and understand what is not paid for, if there is a base year or expense cap, and, if the bldg is multi-tenant, leakage is a concern.", "replies": [], "depth": 1}]