Newbie question: Why are some CRE properties list price create a negative cashflow with a loan?
Example:  Property with national chain list price: $2.971M NOI: 130k 

With 25% down and a 4.5 rate mortgage  is 11,290 - NOI monthly is 10,833 so a loss of $543....Lets say we even got the seller to drop to 2.5M it will cashflow only $1900....not spectacular for dishing out nearly 750k on a DP!
[{"id": "hmjlecy", "text": "The bulk of people/institutions buying into CRE like that are rolling a 1031, doing an all cash deal, or have their own lines of internal funding.\n\nIf you have to go through conventional lending and are only putting down 25-30%, these transactions are probably not for you.", "replies": [{"id": "hmjlylh", "text": "Right, these properties are for institutional investors, not small timers like me and OP.", "replies": [{"id": "hmjmcxt", "text": "Or me...", "replies": [{"id": "hmjnx4p", "text": "Not even with my Axe?", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "hmjwf2i", "text": "Also assets where Tenant is a national/chain like this typically result in lower cap rate.  Usually the tenant is very high credit on a long term lease sometimes 15 years.  I see caribou coffee occupied buildings trading for low caps like OP example.  Jiffy Lube, etc.  And usually the Build Out's are complete resulting in little or even no TI's for buyer.", "replies": [{"id": "hmk9xzd", "text": "The conversion to EVs is going to be fascinating for CRE.  \n\nI bet there are a lot of aggregated portfolios \"rated AAA\" chock full of Jiffy Lubes etc. that will go out of business during their next 15 year lease.", "replies": [{"id": "hmkbtxa", "text": "Do electric vehicles not need regular maintenance on their engine/transmission/etc ?", "replies": [{"id": "hmkdaxj", "text": "Nope. Teslas you rotate the tires every 6500 miles and that\u2019s basically it.\n\nBrakes you hardly ever use bc of regenerative braking. So effectively they last forever (100k+ no problem)", "replies": [{"id": "hmkdc63", "text": "6500 miles is 5130037.12% of the hot dog which holds the Guinness wold record for 'Longest Hot Dog'.", "replies": [], "depth": 6}], "depth": 5}, {"id": "hmkdm7n", "text": "Not really.  Tesla removed the PM schedule, moved to \"as needed\" which is typically a few visits per lifetime of vehicle.\n\nSome of the other manufacturers (legacy auto with dealerships) have some BS PM where they check your wiper blades and brake pads (pads are all still like brand new, EVs don't use up brakes) otherwise the dealerships would refuse to sell the cars. Who wants to sell a car that doesn't need maintenance? \n\nThere **is** a big push by entrenched industry to paint EVs as unreliable, by misrepresenting cosmetics as \"quality issues\" such as new owners not understanding the touchscreen radio, then using that to justify rating them unreliable in magazines.\n\nMy 2018 EV went into Pep Boys once in it's lifetime, for new tires.", "replies": [], "depth": 5}], "depth": 4}, {"id": "hmke4a8", "text": "Do you in think auto parts stores will go the same way as auto service?", "replies": [{"id": "hmkf7l0", "text": "Yes, but not as quickly.  Service is pretty labor intensive and you can't afford to keep service businesses open unless they are busy, while auto parts stores costs are primarily inventory. Think about how long B&amp;M Radio Shack stuck around without customers.\n\nWe'll likely see consolidation in the auto parts market and go from 3-4 parts stores in a given town down to 1.  \n\nI'm honestly surprised we haven't seen disruption in that market from someone like an Amazon doing one warehouse per metro and one-hour-deliveries to your house, like Amazon Fresh.  Maybe the flying delivery drones will be the final nail in that coffin.", "replies": [{"id": "hmkicem", "text": "I am seeing AutoZone aggressively expand their brick &amp; mortar stores as of late.   \n\n\nWhat they seem to be doing though is getting into smaller spaces, holding little (if any) inventory on site, and depending on fast deliveries from larger, strategically placed warehouses.  \n\n\nThe auto parts stores are not focused on the shade tree mechanic DIY'er, most of their business is driven by auto shops that just need a list of parts delivered several times a day.", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hmjlgm2", "text": "To an all cash buyer the Pre-tax NOI (without allowing for any fudge factors) is 4.3% with probability of improvement over time with rent increases, hedge against inflation. Compare that to a ten year US Treasury yield of 1.55%.\n\nYour projected 4.5% interest rate is lower than the Cap Rate, so you have negative leverage.", "replies": [{"id": "hmjvat3", "text": "Why can\u2019t you get lower debt? 4.0% should be fine on a credit tenant. \n\nAlso. The lease is going to have any escalation baked in, I wouldn\u2019t buy it planning to negotiate a new lease.", "replies": [{"id": "hmk1cav", "text": "I think he meant it\u2019s highly probable there are increases in the current lease", "replies": [{"id": "hmkif3i", "text": "Oh, for sure. Just trying to clarify 2% annual base rent vs \u201crenewal at FMV\u201d two different situations", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hmjt25y", "text": "One word (probably): appreciation.", "replies": [{"id": "hmlftxl", "text": "One word: Plastics.", "replies": [], "depth": 2}], "depth": 1}, {"id": "hmjxm1z", "text": "Right - just do a quick analysis and pass over those all cash properties!", "replies": [], "depth": 1}, {"id": "hmk026j", "text": "As most have said, the people buying these are going in all cash or with high down payments and extremely low rates due to their lending profile.\n\nIt is worth mentioning that there are also zero cash-flow assets that are used to offset tax burdens but those are usually megabuck deals.", "replies": [], "depth": 1}, {"id": "hmk5rfz", "text": "There are plenty of deals that you will cash flow well after debt service. Just depends what you are looking at and where. \n\nAlso, a 4.5% interest rate right now is straight up garbage.", "replies": [], "depth": 1}, {"id": "hmkaqea", "text": "My thoughts I looked into buying some investment property I even looked at mobile home parks because of the High return on Investment. After careful consideration I decided to put that money to work for me investing in dividend Stocks earning 7% to 11% JEPI NUSI IEP VALE VON BKCC QYLD not a financial advisor just my humble opinion!!!", "replies": [], "depth": 1}, {"id": "hmkg3vg", "text": "Because some sellers want you to pay for *their* Mercedes (not yours).\n\nBecause you need more skin in the game at some times than other times.\n\nBecause that's the price they want.", "replies": [], "depth": 1}, {"id": "hmkx8cr", "text": "Based on buying for cash. Everyone has different terms for debt. So it can\u2019t be included.", "replies": [], "depth": 1}, {"id": "hmlykx6", "text": "These are called a \u201czero cash flow property\u201d. They are bought for a couple reasons each deal is different. 1) There is a rent bump in a few years that will increase cash flow. 2) The buyer is doing a 1031 and just needs a safe place to keep the money. 3) Buyers can purchase a more expensive property. 4) A company needs to write off a loss before the end of the year.\n\nThose are a few reasons that I have seen.", "replies": [], "depth": 1}, {"id": "hmmfqte", "text": "Because it\u2019s very easy to buy and smoke crack these days", "replies": [{"id": "hmnrznm", "text": "I think ppl are smoking said crack before they buy.", "replies": [], "depth": 2}], "depth": 1}]