Triple NNN - 10 year corporate guaranteed lease with 3 - 5 year options after year 10. 43k a year NOI.
Seller is asking 800k for this deal and I think it’s wayyyyy too much. I was thinking around 500k max. At 500k financed, you’d get your money back in about 11.6 years. 

Btw, does commercial have higher interest rates than residential? This deal is great for someone who’s buying all cash, but I don’t have that cash sitting around…. I do have about 100k though. Seller is not willing to finance. 

What do you guys think?
[{"id": "igs68ve", "text": "A 5.375% cap certainly isn't unheard of, but it depends on the tenant. Your $500k is definitely low. Do some research on the tenant and see what the going rates are. Net Lease Advisor, the Boulder Group, Matthews, and others put out easily accessible info that should help you start.", "replies": [], "depth": 1}, {"id": "igs6haq", "text": "A low cap for a NNN is completely correct. This is actually high and would be a good deal.", "replies": [{"id": "igse6e9", "text": "Yeah was going to say for a corporate guarantee that\u2019s a pretty good cap rate. Depends on location too and the nature of the corporate entity, of course. But a tenant like Starbucks you only get 4-4.5 cap rate.", "replies": [{"id": "igv6pxj", "text": "Is this true? I own 2 Starbucks and have been getting cold calling brokers tell me 5.1-5.3.  \nIf I could sell for 4-4.5 I need a broker to help me ditch the SBUX.", "replies": [{"id": "igv924f", "text": "Last Starbucks deal in my inbox from yesterday: Ft. Myers Florida 3.74 mm. Cap rate: 4.25%. Brand new 10 year lease. How much time left on your leases? What areas?", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "igs79km", "text": "Going to depend on primary lease term remaining, tenant credit profile and location mostly - in saying that, based on rent factor I suspect that it\u2019s a smaller tenant, in which case cap rate is probably within the correct range. Do you mind sharing any of this information?\n\nYield on a \u201cbite size deal\u201d will also be lower due to larger Buyer pool at this price point, which will also compress that cap rate slightly. \n\nHappy to go into further detail if you\u2019re comfortable sharing information ($2Bn+ dollar volume in STNL space over last decade).", "replies": [{"id": "igs9afk", "text": "It\u2019s an oil change center. 10 years lease starting as of last month with 3 - 5 year renewal options. Broker said I\u2019d most likely need 35-40% down and I simply don\u2019t have that money lying around.", "replies": [{"id": "igscgav", "text": "Then you aren't the type of person that purchases this property type. It is for high net worth individuals that want safer, long-term returns.", "replies": [{"id": "igsg17t", "text": "Yeah, plus being an oil change place that\u2019s an additional level of environmental complexity which really suits large invests or REITs better. Personally I would never want to invest in these places at anywhere close to the cap rates offered in this market.", "replies": [{"id": "igslav2", "text": "Aren\u2019t you somewhat protected as the buyer if you do a phase 1 study?", "replies": [{"id": "igsm037", "text": "To a degree. But the cost of forcing someone to comply or the time needed is not free, also laws change (my big worry). \n\nI think this is the sort of thing you want to either buy 50 of and become an expert in the space, or buy none of them.", "replies": [], "depth": 6}, {"id": "igt7e5m", "text": "Phase 1 leads to Phase 2....", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}, {"id": "igt3fx4", "text": "&gt; It is for high net worth individuals that want safer, long-term returns.\n\nThis is precisely the target for this investment.", "replies": [], "depth": 4}], "depth": 3}, {"id": "igsefim", "text": "Did you get a quote on the interest rate you could get? You might not even cash flow  with a smaller % down.", "replies": [{"id": "igsevvb", "text": "You won\u2019t cash flow with less. You\u2019d need at least 36% down to cash flow 338$ a year on this property, assuming a 6% rate. Listing agent gave me an estimate of 5.25% with 35-40% down. So less down would mean a higher rate. \n\nAt the end of the 25 years, the deal will have cost you 989k and you\u2019ll have made 85k in profit. Terrible ROI.", "replies": [{"id": "igsfk9d", "text": "Yeah you\u2019re probably going to have to go farther out on the risk curve if you re set on NNN. I did. And it\u2019s totally doable. But I had the liquid funds.\n\nIf you don\u2019t I agree that NNN may not be for you at this stage. A lot of investors 1031 into those properties after years of real estate investing.\n\nEdit: or find a partner.", "replies": [{"id": "igsfx3w", "text": "Ya the agent mentioned the person that\u2019ll buy this deal will most likely have all cash. It\u2019s just tough for me to be able to get into the game with these rates. I\u2019m trying to look for multi families and they\u2019re just in horrible locations and need at-least 100k in renovations to be able to rent for top dollar. I have 100k in savings and I want to do something with it.", "replies": [{"id": "igsggfo", "text": "Are you currently renting or do you own your own home? Are you in a hcol or locl area? \n\nEdit: I ask bc imo best way to start with that amount would be the triplex or quadplex FHA route. Maybe not feasible in a hcol area though", "replies": [{"id": "igsgstp", "text": "I\u2019m in HCOL, MA. I technically rent, but I rent from my parents for super cheap. Split between me and my gf\u2026 rent is 850. They have about 2.5M worth of rental properties.\n\nMy current salary TC is 102k. I have zero debt, other than the 5-6k of furniture I bought.", "replies": [], "depth": 8}], "depth": 7}, {"id": "igsjb0d", "text": "First you need to buy with 20-25 percent down if more than 4 units, FHA down payment if less units and you plan on living there. I always suggest getting turnkey if you can for your first property. Rehabbing and pulling permits is fraught with issues and things that can go wrong, costing you bigly.", "replies": [{"id": "igsk0y6", "text": "Oh I hear you man, I\u2019ve been looking for a multi for about a year now. Very expensive, current rents are way below market, and they need at least 100k in renovations to get top market rates. Not to mention that multi\u2019s are generally in the lower income areas. I don\u2019t know what to do man\u2026", "replies": [{"id": "igskn2a", "text": "Raising rents is easy. You don't need to rehab to top rents. What area are you looking? Have you considered areas that cash flow better?", "replies": [{"id": "igsl38f", "text": "I would like to own where I live because this is the area I know. I\u2019ve been looking around Massachusetts. My parents own a bunch of rentals in Worcester, in good areas. Everything further East gets increasingly more expensive and everything west gets a bit less expensive. Worcester is the sweet spot in MA.\n\nAlmost did a deal in RI, but not particularly a fan of RI. Lots of poverty.", "replies": [{"id": "igsn1ct", "text": "Not much cash flows from a brief look at Trulia. \n\nI like rural areas. They rarely come up for sale but you have to move fast when they do. What is the closest area to you that sort of cash flows? One of my buildings is 1.5 hours away. I'm looking even farther away now just to find deals.", "replies": [{"id": "igsqzid", "text": "There\u2019s tons of rural areas around me, small rich white towns. Typically these areas have good rent because the schools are good, but the taxes are usually higher and there\u2019s very very rarely any multi families\u2026. Mostly singles. I\u2019m not opposed to single families. Trust me, I\u2019ve been looking all over the place for multi\u2019s and SFH. Very hard to cash flow in this market\u2026 very hard to just break even tbh. Everyone keeps saying commercial is better, so I\u2019ve been looking into some commercials units too.", "replies": [], "depth": 12}], "depth": 11}], "depth": 10}], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}, {"id": "igshp5c", "text": "Right: you have to be creative if you're going to make money in commercial RE by turning a building around or breaking it up into more smaller spaces or something that adds value beyond collecting the rent.   \n\n\nI suggest reading James Randel's brilliant Confessions of a Real Estate Entrepreneur.", "replies": [{"id": "igsieet", "text": "Oooh ty for the book tip.", "replies": [], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "igswpgw", "text": "In addition to environmental concerns, I suspect that we're about to hit the tipping point for electric vehicles. In 10 years, oil change businesses are going to be feeling the pinch if I'm right. Electric cars need way, way less maintenance than ICE cars so I'd be cautious about large sections of car maintenance. \n\nElectric cars will still need brakes, tires, wipers, and body work. But most other mechanical services like oil changes, transmissions, air filters, general tune ups, spark plug changes, etc., etc., will start seeing some disruption after we get enough electric vehicles on the road. I'd also expect a gradual contraction in the number of gas stations, although some may change to charging stations and we'll still want convenience stores.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "igs7cy0", "text": "At 800k, you\u2019re buying at a 5.4 cap rate. You\u2019re asking to buy at an 8.6 cap rate for a corporate guaranteed lease with 10 years left. That pricing is hard to come by in todays market unless the tenant isn\u2019t credit worthy (which in that case it would be almost impossible to get financing). \n\nIt would be hard to get a commercial loan with 80% LTV. You likely need to have a significant down payment (35% or more) and the debt service coverage ratio probably needs to be well over 1.5. With current interest rates it\u2019s hard to make this work.", "replies": [{"id": "igs8218", "text": "Yes I asked the broker for a potential rate and she said it would most likely require 40% down at 5.25%, 25 year amortization.", "replies": [{"id": "igsfz2j", "text": "Pretty typical.", "replies": [], "depth": 3}, {"id": "igw5t2c", "text": "Prices are a little stupid considering where rates are at right now. Just wait a little bit I get about 7 or 8 emails a day regarding commercial real estate and over the past week and a half every single one that's coming in says price reduced.\n\n\nThose rates continue to move up prices are going to keep getting reduced at some point people who have to sell are going to drop their pants for you", "replies": [{"id": "igx4asa", "text": "Any email lists that you recommend?", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "igsd0gt", "text": "Seller\u2019s pricing is fine. But you\u2019ve hit the nail on the head \u2014 CRE interest rates are rising, and you won\u2019t make a lot of money on this right away. Eventually (if the lease rate escalates) you\u2019ll start making a mild profit, but if there\u2019s no larger upside (rehab, whatever) then you may want to walk away.", "replies": [], "depth": 1}, {"id": "igsfvro", "text": "You don\u2019t have enough to buy the deal even at $100k on a $500k purchase. Very rare to get 20% down approved on a pure play investment deal. Typically 25% min but more like 30-40% down.", "replies": [{"id": "igsgaj2", "text": "At 500k with 40% down, I\u2019d do the deal all day. I could come up with 200k easy. I have a 100 and my parents could give me a 100.", "replies": [{"id": "igsgje6", "text": "Yea. But corp backed deal isn\u2019t trading at an 8.6 cap these days. I\u2019d hop on that deal all day but it doesn\u2019t exist.", "replies": [{"id": "igshci9", "text": "It\u2019s tough man. The numbers just don\u2019t work on this deal unless you have cash. And even if you do, the ROI isn\u2019t that great. Could probably do better investing in an ETF", "replies": [{"id": "igshmow", "text": "Eh. Matters your time frame. The benefits of depreciation, cash flow and asset appreciation tend to beat the market most places.", "replies": [], "depth": 5}, {"id": "igun8i3", "text": "They do work though. These are market rates. \n\nTypical buyers for NNN lease assets are HNW individuals. They are looking for safe investments (i.e. with credit-rated tenants) that they can 1031 into which is why these deals have some of the lowest caps in CRE. \n\nThey\u2019re usually rolling large amounts of equity in order to defer taxes. They aren\u2019t scrambling to scrape together a down payment. They are scrambling to find a deal to park their funds. You do not seem to fit this buyer profile. \n\nLow risk equals low cap. High risk equals high cap. Your opinion of value is low.", "replies": [{"id": "iguop9v", "text": "You\u2019re correct. I don\u2019t fit the profile for this deal, but it doesn\u2019t hurt to negotiate. I present what works for me and the rest is out of my hands.", "replies": [], "depth": 6}], "depth": 5}, {"id": "igv4jnb", "text": "\u2026 I mean, the numbers don\u2019t work if you only have 100k and are trying to convince a seller to sell at like a 40% discount. \n\nBut it\u2019s a YOU issue\u2026", "replies": [{"id": "igwuuvx", "text": "No it\u2019s not really a me issue, because the numbers don\u2019t make sense unless you\u2019re putting down at least 36%. At the end of the term you\u2019re only netting ~89k. To make 89k over 25 years while investing 288k\u2026 not a good deal. That\u2019s about a 1% return per year, for 25 years\u2026 that\u2019s less than what you\u2019d made with just putting your money into an etf. Buying this dip in the market will almost guarantee youll triple your money in the next 2-3 years (been proven after every market drop). If I had 288k to invest, I wouldn\u2019t be locking it up on 1 deal. The financing is what kills this deal. That\u2019s why I said it\u2019s a better buy if you\u2019re using all cash. \n\nThere\u2019s no shame in presenting the seller what number makes sense for me.", "replies": [{"id": "igwvzsz", "text": "According to what? Your shitty 5-month experience of underwriting (and probably institutional level assets), and lack of cash?\n\n1031 buyers exist. You realize this? Other people also have cheaper capital. Do you realize this?\n\nJust because you can\u2019t afford it, doesn\u2019t mean you can justify a mid-eight cap corporate-backed STNL. \n\nRolling on the fucking floor. Look at how everyone else responded. Surely, at 25, you can\u2019t be that dense?\n\nHurrr durr mr. Ferrari dealership, your car prices DON\u2019T MAKE SENSS BECAUSE I ONLY HAVE TWO HUNDRED DOLLARS!!! THE PRICING MUST BE OFF.\n\nLike, what a clear and utter misunderstanding of basic supply/demand fundamentals. Holy shit.", "replies": [{"id": "igwwhwk", "text": "Ya there\u2019s people that are better off than all of us. That doesn\u2019t change the fact that I\u2019m going to present an offer that makes sense to me. What\u2019s trading on the market is irrelevant TO ME. Believe it or not, people negotiate deals all the time. Is 500k too low? Not to me, especially given that this building is not easily repurposed and given current rates.\n\nDon\u2019t belittle me for trying to do something with my money. I don\u2019t know of many 25 year olds that have a six figure checking account.", "replies": [{"id": "igwxqf6", "text": "Rofl", "replies": [], "depth": 9}, {"id": "igwz3el", "text": "That\u2019s a weird fucking way to say \u201cI can\u2019t afford it\u201d", "replies": [], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "igsjen8", "text": "True but in multi-unit on the other hand it could totally happen.", "replies": [], "depth": 2}], "depth": 1}, {"id": "igsl4f6", "text": "43k on 800k is on target with other cap rates I see for NNN. Depends on the area but I am sure you can negotiate to $700k", "replies": [{"id": "igsruq1", "text": "I believe it\u2019s in Columbus Ohio. The numbers don\u2019t make sense unless you\u2019re an all cash buyer. Price is too high to profit if you finance, especially at current rates. Plus this property would be useless if the tenant leaves. Very hard to repurpose this building, would require significant capital.", "replies": [{"id": "igst82q", "text": "You are right, need to be all cash buyer. Financing would help cap rate but hurt profits, especially with today\u2019s rates. Have you thought of a business partner?", "replies": [{"id": "igsui08", "text": "I have no idea where to find business partners. You have no idea how bad I want a mentor/partner.", "replies": [{"id": "igt4nlx", "text": "Have you tried partnering with your parents? You say you live with them, can get funds from them, and they are already in the business with rental properties. What am I missing?", "replies": [], "depth": 5}, {"id": "igtk02g", "text": "Send me a chat message, I can give you some ideas on how to proceed", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "igsme28", "text": "Rent numbs in lease? Price seems reasonable depending on credit / location", "replies": [], "depth": 1}, {"id": "igt8wp1", "text": "need to understand what entity is providing the corporate guarantee (i.e. how far up the chain).  in most cases, there's not much to go after, more so for national tt with experienced lawyers able to shield layers of parent entities.", "replies": [], "depth": 1}, {"id": "igu0vj7", "text": "Need to clarify term. \nNeed to understand tenant profile better, a corporate guarantee is a strong factor.\nAlso, how big is the lot size, how big is the building? Can\u2019t hurt to see how land value compares to surrounding area. \n\nIn Miami, our NNN deals can trade from 4-5% Caps depending on the lease\u2026.location plays a part", "replies": [], "depth": 1}, {"id": "igu54zi", "text": "Who is the tenant and where is it located (state)?  Really depends on the corporate credit, but 5.375% CAP could be right around market depending on the tenant.", "replies": [], "depth": 1}, {"id": "igv873b", "text": "Cap rates at sub $1m sound a little onerous\u2026.direct comp not available?", "replies": [], "depth": 1}, {"id": "igymqz9", "text": "You know I signed up years ago. Do you have to sign up with all the commercial broker companies all the Nationwide ones. You'll start getting a flood of emails", "replies": [], "depth": 1}, {"id": "ij00f58", "text": "I have a Kohls Department Store in Jensen beach Fl, 6.28% cap, noi = 1.32M , 5 years left on lease plus 6x5 year options. If theres any buyers here or brokers with buyers let me know.", "replies": [], "depth": 1}]