First Deal. Proforma and Deal Structure Help?
Backstory: 25 and Currently getting my masters in real estate, spent 2 years at CBRE and am now working for a GC. Looking to do my first deal. More of a learning experience than trying to hit a home run. Have a family member putting up the equity needed. Have created a proforma from school and work over the years. Roughly created a payout model on one of the tabs. Not really sure how to structure the equity payout to a deal? Proforma reflects 7% on equity for 5 years and then refi and payback. Then sell or resign tenant at year 10. Anyone have any comments? See any red flags? Thoughts?

https://i.redd.it/x49q9x598nc21.jpg

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[https://docs.google.com/spreadsheets/d/1Xd5YOBCG1tpzjAreh296zwCjSMZqG6HgM8DHTWKudUg/edit?usp=sharing](https://docs.google.com/spreadsheets/d/1Xd5YOBCG1tpzjAreh296zwCjSMZqG6HgM8DHTWKudUg/edit?usp=sharing)
[{"id": "eeyuzpv", "text": "What are lease terms NNN ? Gross? 3% for operation expenses seems low. \n\nSorry just noticed the bellow picture. \n\nWeek structured . ", "replies": [{"id": "eeyva2b", "text": "\"NN\". Taxes any any roofing expenses are on the owner. ", "replies": [], "depth": 2}], "depth": 1}, {"id": "eeyxu3k", "text": "For the RE Taxes, did you reassess for sale? At least in CA, they reassess based on sale price at whatever the local tax rate (usually just above 1%, depending on market). If this is the case, you'd be paying a lot more in taxes after the sale. I understand this is a Net deal, so not sure if the taxes are your responsibility or the tenants\n\n&amp;#x200B;\n\nedit: saw your comment. looks like owner pays taxes, so I'd check to see if they'd be reassessed and what the tax rate is on the property", "replies": [{"id": "eeyyeq0", "text": "Current taxes for both are 4200 so rough assumption I increased them 20% to 5000", "replies": [{"id": "eeyytuz", "text": "That's not how the tax assessor will see it. Go on the county website, check what the tax rate is. Apply that tax rate to the sale price, and that will be your annual taxes. It's the only operating cost you know for certain (the others are mostly guessing). The \"assessed value\" is the purchase price. They assess it at that value because that's what someone paid for it. \n\nThis can bite you on an older building that hasn't been sold recently. It was probably assessed on its last sale and only increased 2% annually, whereas the real estate market has inflated at a much higher percentage. ", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "eez0dbg", "text": "Just feels like your opex are super low even if this is \u201cNN\u201d as you indicated. ", "replies": [], "depth": 1}, {"id": "eez1pgw", "text": "Don\u2019t buy those deals based upon the current lease, but them based upon what the market rents would likely be if he terminated.  The assets of those businesses along with what you could collect from the owner could all be nothing.  That lease combined with the credit of the tenant looks like garbage to me unless it can be substantially proven otherwise which I doubt it could.  Hell.. the tenant might be in on it.  Those buildings are worth like 200k combined if vacant. ", "replies": [{"id": "eez3986", "text": "A lot of to good to be true comments I guess. Yes $46/sf seems like a lot but I have signed 10 year lease agreements in my inbox, for what it\u2019s worth. We are waiting for credit report and I guess I should look into the validity of the marketing flyer of them being onsite for 30+ years", "replies": [{"id": "eez3jsp", "text": "Lot more downside than upside in this deal from what I can tell.  I\u2019d need to see over a million on a PFS along with a personal guarantee for that lease to be worth anything more than toilet paper. ", "replies": [], "depth": 3}, {"id": "eez5ls2", "text": "How the fuck are they paying $46 PSF NN on a garbage class D shack? Class A office space in Dallas is like $46NN. This sounds way way too good to be true. Are you giving the tenant a stupid big TI package?\n\nWhole thing sounds like kind of a scam. Would only do this deal if there is a huge personal guarantee on the lease with guarantor net worth covenants. ", "replies": [{"id": "ef19f4b", "text": "Look at the space - it\u2019s like 1000 square feet max. So $46,000 in annual rent per building.\n\nThe smaller the space is the higher the psf is going to be just like in multi family apartments ", "replies": [{"id": "ef29pj3", "text": "Comparing PSF office lease rates to multi family is apples to oranges (unless your talking about like Regus/WeWork). There is no way no how that space should rent for $46 PSF net for a 10 year deal. That just doesn\u2019t even begin to pass the sniff test - you\u2019re trying to tell me that someone would sign a lease for this building at an annual rate that\u2019s like 50% the replacement cost of the buildings?\n\nMy gut is that the business leasing the properties owns them as well and is signing a lease at a crazy rate to get someone to pay an overinflated number to purchase the properties - just a big sale leaseback for a total non credit tenant. Don\u2019t be that guy who does a sale leaseback for a non-credit tenant. Some sucker will give this guy a ton of money in the sale lease back, he goes belly up because he can\u2019t make fixed costs, and you\u2019re left owning Class D retail that you re-lease at maybe $12 net in 2 years. ", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "ef0t9oq", "text": "The flyer says the lease renewals start in 2020. You should ask that the tenants re-up now before you buy and see what they say as a smell test. ", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "eez5941", "text": "Entry vs Exit Cap rate. Calculate before and after tax proforma cash flows.  IRR and NPV for equity investor.  Assume sale after x years with stable NOI.", "replies": [], "depth": 1}, {"id": "ef23b9h", "text": "Where are you getting the purchase price?", "replies": [], "depth": 1}]