Buying this Starbucks makes no sense? Am I missing something?
I'm new to commercial real estate, but it's something of a dream to own my own Starbucks, or just the building it's in, and there are a lot more than I thought out there to buy through an NNN lease but none of them seem to turn a profit when I run some numbers.

For example: [This one here](https://www.crexi.com/properties/957322/louisiana-starbucks)

Asking price is $1.78m, NOI is $97.5k, and taking a look at it shows I'd be paying roughly $10k a month, with half the total payment being interest. That far exceeds the NOI/year.

I must be missing something. How would one go about actually acquiring this properly and using the rent to pay off the loan with at least some cash flow left over?
[{"id": "j19te7e", "text": "Ever heard of a loss leader?  You're paying for the privilege of having a Starbucks at your complex.", "replies": [{"id": "j1aqdlh", "text": "But the Starbucks is already there, whether you buy it or someone else does\u2026?", "replies": [{"id": "j1ax5tz", "text": "Yes, and Starbucks knows there are enough people out there  that own commercial spots that they can pay just enough that you make next to nothing, but make it up on the other tenants. \n\nWhen I say 'you're paying for the priv', what I mean is that you are netting zero on that unit (aka paying) to have them as a tenant.  \n\nThe real question is, do they as  a tenant, really bring value/traffic/cache to the property (enough to justify higher rents on the other units to end up netting the same or more?) if you had NOT leased to them?  Or are there just enough guys like OP that REALLY want to rent to a Starbucks, and hang out in the early morning with steam coming off his coffee, wearing his LLBean fleece telling his buddy, \"Yeah, I own this place.\"", "replies": [], "depth": 3}], "depth": 2}, {"id": "j1eikcm", "text": "Loss Leader is an ad on inexpensive product to get traffic through marketing.\n\nSBUX here is an 'anchor' which draws traffic via it's existing brand and followers. Considered low risk; akin to the bond analogies.\n\nHaven't read the ad; is a larger complex for sale?\n\nNoting other commenters: add value constructing a drive through with lease renegotiation ... Also noting Verizon &amp; SBUX lawyers mentioned...", "replies": [], "depth": 2}], "depth": 1}, {"id": "j19uf07", "text": "this is where \"value add\" starts\n\nyou want (need) a plan to make the place more valuable/ profitable\n\nor, don't buy it, that's fine too", "replies": [{"id": "j1a73qw", "text": "LOL at trying to add value to an operating  Starbucks\u2026", "replies": [{"id": "j1aqbpu", "text": "Going for a drive thru if it doesn\u2019t have one already, maybe?", "replies": [], "depth": 3}, {"id": "j1blua7", "text": "They could add tea to the menu, hot, cold and sweet!", "replies": [], "depth": 3}, {"id": "j1d83il", "text": "Shiatsu seating options, foot rubs, nude staff", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "j19wb5m", "text": "You're assuming you can borrow more than you actually can on this property.", "replies": [], "depth": 1}, {"id": "j19wmjf", "text": "NNN high tier credit, corp backed deals are places to dump 1031 exchange funds to turn your tax bill into reliable cash flow.", "replies": [{"id": "j1d624m", "text": "No nut November high tier credit?", "replies": [{"id": "j1e4t4a", "text": "Triple net lease", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "j19xdg9", "text": "You assume real estate investors require a lender.  In the last 24 months I've sold one lot for $1.9m and a small strip center for $4.5m.  1031 both sales.", "replies": [], "depth": 1}, {"id": "j1a0l6o", "text": "You\u2019re paying for investment grade tenancy and the brand name. You won\u2019t find good cash flow where debt is today for anything trading tighter than a 6% cap. If pricing doesn\u2019t drop, this\u2019ll likely go to an all cash buyer", "replies": [], "depth": 1}, {"id": "j1acdnh", "text": "I would find another dream. If you like retail strive for local tenants with a solid operating history. You will make more money and not have to deal with starbucks lawyers if shit hits the fan. Them and verizon gave us the most headaches during the pandemic trying to get out of rent payments. Also if you buy a store that unionizes there is a strong possibility they will shut it down.", "replies": [], "depth": 1}, {"id": "j1adcyi", "text": "it's a trap", "replies": [{"id": "j1d388e", "text": "Feels that way, but then again CRE has helped to make me super paranoid. Absent any meaningful context on submarket, store performance, etc... my immediate gut reaction to the marketing info was \"Oh yea, they'll be vacating that at there lease expiration here in about 9 years\"", "replies": [], "depth": 2}], "depth": 1}, {"id": "j1ag8ix", "text": "CRE deals focus on things like DSCR and Debt Yield when doing a loan. Your assumptions are off and leverage would come down to make it make sense. So more up front equity would be required. \n\nThings like this or CVS, Wal greens all are investment grade tenant meaning more stable cash flows and people buy them often at all cash or low leverage and just clip coupons.", "replies": [], "depth": 1}, {"id": "j1agojg", "text": "This doesn\u2019t compete against other real estate. It competes against fixed income financial products. Many are cash buyers (with or without 1031) that would either buy $2m of bonds or this.", "replies": [{"id": "j1b8c9j", "text": "100% Agreed. Plus, with a strong location - you're banking that rents go up, while bond yields might decrease back down over time. It's no different than locking in a 4-6% return for the next 20 years, while (hopefully) gaining appreciation of the land.", "replies": [{"id": "j1d2urt", "text": "... with the risk they vacate after 9 (lease expiration date)", "replies": [{"id": "j1dd5bm", "text": "Or move to have a drive thru bigger stack and bldg.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "j1amjfk", "text": "You have to do the work to bring Starbucks to some building or land they want to be in and then create value by signing a lease with sbux. Buying a stabilized sbux is for the coupon clippers.", "replies": [], "depth": 1}, {"id": "j1an1t3", "text": "That\u2019s a bond, not real estate.  Different animal.", "replies": [], "depth": 1}, {"id": "j1b1e99", "text": "I\u2019m heavily invested in NNN properties, and ironically have a Starbucks. The simple answer is you don\u2019t. Most NNN sales are straight cash or 1031 exchanges. If you don\u2019t have enough equity in other properties or liquidity it\u2019s not even worth thinking about. Loans in this world only make sense if you need a small one for probably 20% or less of the total sale.", "replies": [{"id": "j1b353h", "text": "You mention doing it for all cash. But unlike a bond you don\u2019t get the principal back. So it\u2019s a pretty large risk right?  How do you think about it?", "replies": [{"id": "j1b8mbu", "text": "Starbucks would generate a fixed return. Bonds have specific terms with rates could decrease over time. Plus, depreciation would offset most of your taxable income - so, it's not quite an accurate comparison.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "j1b30yo", "text": "5.4% cap? That\u2019s actually not bad for a Starbucks nowadays. Not sure why there\u2019s so much negativity on here. Typically these deals are sub 5% cap easy, although interest rates have definitely helped cap rates to a degree. \n\nThe other thing you may run into is banks don\u2019t like taking collateral that\u2019s specialized. Restaurants (which includes coffee shops) are a big one. \n\nBut overall you\u2019ll need quite a bit down to cash flow. Looks like assuming 7% rate over 25 years (generous), max loan amount is a bit north of $900k that any prudent lender would approve to stay at their debt service coverage ratio. And these are all very generous assumptions.\n\nLike others said, this is a 1031 type of purchase or someone with a lot bigger pockets with money to park.", "replies": [{"id": "j1d2zd7", "text": "9 years term maybe impacts it? Been a while since I've been in the cap rate game (moved to another facet of CRE industry)", "replies": [], "depth": 2}, {"id": "j1ixgri", "text": "Not anymore. A number of new construction listings recently at 5.5 with sellers willing to take 5.75 if no finance contingency.", "replies": [], "depth": 2}, {"id": "j1p1q61", "text": "6 cap is the new 5 cap. Unless your in NYC or industrial inland empire, nothing trades for less than ~5.8 cap. Even investment grade national tenants. Wouldn\u2019t touch a Starbucks at a 5.4 cap in the current interest rate environment. Especially at 9 years (not sure if it has drive thru but that is a must nowadays).", "replies": [{"id": "j1p8tf3", "text": "Even if you could refi in like a year to a year and a half? Seems like an easy call tbh", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "j1d7ubd", "text": "Buy a small strip mall instead: vape shops, rub and tugs, nail salons, ethnic grocery, pet grooming.\n\nThis is \"big boys\" stuff: capital preservation, not growth, like others have said, its a bond with an address.", "replies": [{"id": "j1eh35b", "text": "That kind of strip mall you mentioned is the worst one to manage.", "replies": [], "depth": 2}], "depth": 1}, {"id": "j1d8xas", "text": "For any CRE purchase keep the tax cuts and job act in mind\u2026this year was a 100% special depreciation. 2023 is 80%. Added benefit compared to a bond or other low return investment.", "replies": [], "depth": 1}, {"id": "j1dcx96", "text": "I don\u2019t think OP has done enough research. You can\u2019t buy a Starbucks. You can\u2019t franchise one. Maybe licensing. But not actually own a SBUX. You are buying an existing SBUX location. You will not be able to sell anything SBUX in there unless you have a licensing agreement. Much like target or Barnes and nobles. \n\nPlease correct me if I am wrong. I just don\u2019t want OP thinking they can buy a SBUX for a couple million. If that\u2019s the case everyone would have ditched the DD and do SBUX instead.", "replies": [{"id": "j1dvdhd", "text": "Sbux is just the tenant on a lease.", "replies": [{"id": "j1ezgge", "text": "Idk. The way he makes it sound \u201cit\u2019s always been a dream of mine to own my own SBUX\u201d. Pretty sure he thinks he is buying one.", "replies": [], "depth": 3}], "depth": 2}, {"id": "j1ehk4p", "text": "I think you are missing here. OP clearly knows he is buying a NNN with Starbucks as a tenant.", "replies": [{"id": "j1ezbkj", "text": "Ah okay. Gotcha. He was saying that it\u2019s been a dream of his to own a SBUX. So it makes me think he thinks he is purchasing a SBUX.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "j1dn9y3", "text": "congratulations there are a lot of things that you can do to increase your cash flow in this situation and make the money that you've always wanted to make\n\nI wore work for a boutique real estate, tax firm, and here is one of my clients who did the same thing you are doing .\n\nplease feel free to contact me happy to help !!\n\n1031 Exchange for Starbucks, FL\nPurchased 06/2021, appx 2,200 sf\n\nPP $2,554,000 (of which $850,000 is total depreciable basis)\n\n\ud83d\udca5Owner's 2021 depreciation expense without cost segregation - $10,256\n\n\ud83d\udca5Owner's 2021 depreciation expense with cost segregation - $402,228 \n\nhere to help! feel free to dm me with questions", "replies": [], "depth": 1}, {"id": "j1egq1l", "text": "I lived in that City (Lafayette, LA) before. Except Starbucks is a A tenant with high tier credit tenant, that particular part of City is also a fast growing. Appreciation is also a key consideration.", "replies": [], "depth": 1}, {"id": "j1ejv1v", "text": "Reposted instead of crossposted; more convo here: \nhttps://www.reddit.com/r/realestateinvesting/comments/zst4vm/buying_a_starbucks_makes_no_sense/", "replies": [], "depth": 1}]