Offer turned down...why?
Well, we made an offer on a Denny's.  I am a first time buyer of NNN properties (maybe that's why).  When we submitted the offer, we were at a 6% Cap rate!  I thought that was good but the sellers rejected the offer without a counter citing that they are interested in cash only offer.  I guess when my realtor put the offer letter out, he had the loan stated at about 70% of the total when the the loan was only going to be at 50%.  Any insights?  Is it because we are first time buyers of NNN properties or is because the loan to value was too high?
[{"id": "cpdb30v", "text": "NNN properties like that are almost always cash only.\n\nMost of the time people just exchange into them because they are safe from what i have seen.", "replies": [], "depth": 1}, {"id": "cpdemjj", "text": "I could be wrong here, but when I submit offers, we always say that closing will happen in cash. My buyer may secure financing (we give a due diligence period to make that happen) but at the end of the day, at the closing table, the seller walks away with cash.\n\nAnother option is that their business is being used for illicit purposes and they don't want a bank involved because it usually involves an appraisal etc. Perhaps they want cash to avoid the spotlight.", "replies": [{"id": "cpdwb6j", "text": "I prefer to say that closing will happen with reddit karma. I may have to drum up a bunch of click-bait posts, but at the end of the day, the seller is getting that karma.  \n\nIts redundant to say that closing will happen in cash, and if you aren't giving your clients a financing contingency (unless you always have really long due diligence periods), you're going to have a bad time. ", "replies": [], "depth": 2}], "depth": 1}, {"id": "cpdh7qb", "text": "Depending on your location a 6 cap may have been a low ball offer actually. Any stabilized nnn property with a high credit tenant like a Denny's or Starbucks etc is likely trading at a 4.5 cap or lower. All cash offers are important for nnn deals right now be they are guaranteed basically. Loans are riskier and in this market there are always cash buyers. For nnn you're facing buyers from all over the country since they are low management properties. In most markets nnn properties will trade to buyers taking loans. It's advantageous to lock in at least a 10 year lease before you try to sell as most banks will not give a loan unless there is certainty about the tenant. Keep trying. It's hard to buy right now but not impossible. ", "replies": [{"id": "cpdljph", "text": "Denny's is definitely not a credit tenant.  You can't really compare them to Starbucks. ", "replies": [{"id": "cpdw6sw", "text": "Come on, DENN has a Moody's B2 rating from 2011. It's only like a letter grade below SBUX unsecured A3! /s\n", "replies": [{"id": "cpdzhyd", "text": "Haha good point! Highly speculative also sounds way cooler than upper medium grade. ", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "cpdjzcj", "text": "Did your broker back up the offer price with any sales comps? As others are saying, a 6 cap does not seem aggressive enough. Your broker should be able to communicate with the seller's broker on where other offers are coming in. ", "replies": [], "depth": 1}, {"id": "cpdp8cq", "text": "Loans take for ev r. For ev r. ", "replies": [], "depth": 1}, {"id": "cpdp9ip", "text": "I wish I could get 6% for my industrial properties. I'm holding off until I can get 8-8.5%", "replies": [], "depth": 1}, {"id": "cpdpjm3", "text": "Sorry. What's nnn?", "replies": [{"id": "cpdrz6m", "text": "http://lmgtfy.com/?q=nnn", "replies": [], "depth": 2}], "depth": 1}, {"id": "cpdtkwy", "text": "A 6% Denny's NNN (Depending on all the lease terms) may not or very closely cover DCR at 70% or lease terms may make it impossible to finance.  How long is left on the lease.  Have you talked to bankers about financing this?  Even at 50% you may have problems depending on lease structure.\n\n6% isn't low either its where stuff like that is trading (not an expert on Denny's notably).  \n\nDo you have a commercial agent?  what do they think about all this?  Has he called them up and talked to them and indicated you had a lender lined up at 50% and had POF to close at that?", "replies": [], "depth": 1}, {"id": "cpdtu1u", "text": "Caps have compressed so much. It helps to use a broker who knows this product type and has a history of getting things done.", "replies": [], "depth": 1}, {"id": "cpe5hxd", "text": "Why don't you ask them, it might be the best thing you can do.", "replies": [], "depth": 1}, {"id": "cpgylf7", "text": "I only do NNN and know the market inside and out - let me know if you'd like me to help.  I'm assuming your broker didn't package the offer correctly and you were too far off from list.  The loan also isn't very attractive but you can get them approved if done correctly.  ", "replies": [], "depth": 1}]