How much due diligence on structure and mechanicals for purchase of NNN property?
Kind of seems like this shouldn't be such a big deal on a NNN property purchased with a long term lease? I'm buying out of the area and wondering how concerned I should be about long distant inspections and such?
[{"id": "ir3dcjj", "text": "Just because a property is NNN, doesn't mean your DD should less rigorous.  If you think you can just pass any/all expense along to the TTs, you'll be in for a quite a surprise as your opex/reimbursables reach/exceed the upper limits of market and you'll have to reduce your rent to attract/retain tenants.  Brokers won't be too happy to show your property because 1) they know TT will get scared away by opex (something they don't have control over) and 2) broker will get a smaller commission based on the lower rent you need to charge due to your high opex.", "replies": [{"id": "ir3ts48", "text": "I get that, but in my case I'm looking at a property  that has a brand new ten year lease with an existing tenant. Seems like the due diligence would have been more on the tenant than me. Am I missing something?", "replies": [{"id": "ir5p6kq", "text": "Don\u2019t forget that you\u2019re buying the real estate not the tenant. Tenants blow out all the time. Even publicly traded nationals will sometimes go dark and play hardball with rent. Just imagine what could happen in a recession.", "replies": [{"id": "ir61eai", "text": "Especially a single tenant property... 100% to 0% occupy overnight. At least for a multi tenanted, you have some breathing room with your lender.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ir3uvnj", "text": "You absolutely need to do your DD. Tenant\u2019s credit is one big thing, you have to make sure they can pay rents for the duration of lease. You need to make sure the property is good enough for financing, either now or future. The bank might not like the property given age quality etc. Lastly any environmental issues will effectively make your property worthless.", "replies": [{"id": "ir4j3gv", "text": "Yeah, my due diligence is focused on the tenant more than anything at this point. I was only asking about structure and mechanicals due diligence since  problems that way don\u2019t seem to fall that hard on me. As for environmental, I don\u2019t think the property is old enough to have lead or asbestos. I suppose in theory there could be toxic waste but that seems a bit random and I wouldn\u2019t have thought for a normal property to have soil samples taken. Is that the norm?", "replies": [{"id": "ir6x2nr", "text": "Just do a phase 1 report, if that comes out clean you\u2019re good no need for soil sample. That report will also help you get financing.", "replies": [{"id": "irdo8ki", "text": "Got it - thanks!", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ir5h6b7", "text": "Are you taking out a loan? What's your bank requiring you to do?", "replies": [], "depth": 1}, {"id": "ir6v5ux", "text": "You need to clarify. Are you getting Phase I, asbestos testing and a PCR? \n\nYou seem to reference specific mechanical systems, crane? Dock levelers, automatic gates?", "replies": [], "depth": 1}, {"id": "irpvprm", "text": "If you have a long term lease and the tenant has a decent credit rating, then inspection is not as important.  You\u2019re not dealing with mechanicals for 10 years.  Structure/ roof is probably on you, so worth checking out.", "replies": [], "depth": 1}]