Noob investor in NNN property
Hi,

I am a first time commercial real estate investor. Prior to this I have owned and managed SFH but not a commercial property. Recently I became aware of a great NNN property with a single tenant (big pharmacy chain) with over 10 years on the lease. I also have a lender willing to work a 100% lending deal. How should I move forward? What are the things to consider?
[{"id": "dfttpf9", "text": "The property list price is in the lower 2 mill and cap rate is 8%", "replies": [{"id": "dftv15o", "text": "If it is a Rite-Aid, it might go dark in the next few years or become another store (like auto-parts) since they are merging with walgreens and have to shutter some stores.\nThe good news is that you will continue to get your rent, the bad news is at the end of 10 years, you might have to retenant and will have to pay the debt load while getting no income.", "replies": [{"id": "dftv3o4", "text": "I am also very interetsed in this 100% lending, I have only seen those situations when they are getting 10% interest, making you 2% upside down.  If they are giving you like 5% it is a no-brainer.", "replies": [], "depth": 3}], "depth": 2}, {"id": "dfujwlw", "text": "That's a high cap for a Walgreens/CVS, what's the catch?\n\nNot a big fan of nnn retail in US suburbia", "replies": [{"id": "dfuvewp", "text": "\nAm curious why you don't like nnn?", "replies": [{"id": "dfvntih", "text": "&gt; retail in US suburbia\n\n", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "dftxd2b", "text": "Just a point of order here, make sure if you are counting on 100% lending that you have an agreement on value beforehand.  Lenders typically (should) be slightly below appraised values... at least in my experience... and can often be several times removed from what a market participant is willing to pay.  From a lending perspective, I think this makes sense, as you don't have any potential upside, just downside and clipping the coupons.  I don't think I have ever seen a lenders \"value\" be higher than an appraisal... sometimes they will get close to, but never personally see anyone go over.", "replies": [], "depth": 1}, {"id": "dfu90yb", "text": "If it's a credit tenant, study up on their financials, latest news etc. If it's not a credit tenant, ask yourself what you are going to do when it goes dark or needs a big upfit.", "replies": [], "depth": 1}, {"id": "dfub2bb", "text": "What lender gives 100% LTP?", "replies": [{"id": "dfujvkt", "text": "Send me their number please ", "replies": [], "depth": 2}, {"id": "dgcnefm", "text": "Check out CTL financing. Dangerous stuff. ", "replies": [], "depth": 2}], "depth": 1}, {"id": "dfucpnq", "text": "Honestly\n\nThe fact that you are even asking this question is a clear signal that you shouldn't be making this acquisition. You are NOT ready to become a commercial landlord. Stick to single family residential before you make the biggest financial mistake of your life. \n\nGet experience being a landlord on a small, value add retail property before jumping into a long NNN single tenant lease. You need to know the ins and outs of everything before purchasing a property for 2m. Do you even know that cap is the actual cap? What's the market conditions like? What is the retailer? The advice here is right. 3500 big box single tenant retailers are expected to close in my state alone this year. What are the nets estimated to be? How's the HVAC/parking lot/roof condition? New construction or old? Etc..\n\nDude, you are not ready and this is an acquisition you should not take lightly. If you acquire this property I see nothing but failure for you in the future. Learn as much as you can first and at a small stage before tackling a decent size acquisition. \n\nBest of luck noob ", "replies": [{"id": "dfuistd", "text": "3,500. Scary stuff. What state? I may be getting back an HHgregg at the end of the week and I'm a little nervous. ", "replies": [{"id": "dfuuirh", "text": "The northwest. But I think it's all across the board in the current retail segment. \n\nMacy's, GameStop, BeBes, gander mountain, sears, Dillard's, etc (big box retailers) are all closing doors soon. What they do is then take these 100,000 SF boxes and partition them into smaller 5,000-10,000SF spaces. Much more cost efficient. \n\nI just see so many single tenant net leases on the market right now it makes me wonder if this is a wise investment. I wasn't kidding about staying in SFH, if that's cash flowing you right now, stay there. People will always need a place to live, however, in the future, they may not be working.\n\nI think the better way to go about this is to post the tenant, post the NOI they are projecting, give us insight on building / market conditions, and ask us what we think ", "replies": [{"id": "dg6giv9", "text": "I would stick to a multi-family neighborhood strip center around 10 - 15,000 SF with  10 tenants or so. It's a lot safer than investing in big box -- ie. if one of your tenants leave you still have 9 other tenants paying rent. Whereas if your big box tenant leaves you have no rent, you foreclose, and you lose all your money. Be smart and hire a broker to lead the acquisition.", "replies": [], "depth": 4}], "depth": 3}, {"id": "dfuxzj4", "text": "Wow that's a tough one. How many years of debt left? ", "replies": [{"id": "dgeam50", "text": "5 years. They confirmed they are closing. ", "replies": [{"id": "dgeh5vw", "text": "That sucks. Do you have a plan on mind for the building? ", "replies": [{"id": "dik4uwr", "text": "We just started looking into splitting it. Most of the interest was from 20K SF tenants. ", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "dfujpdx", "text": "This is good advice but with a 100% loan, the finance / bank guys stand to lose way more -- worse case they foreclose and sell it for a loss and then try to chase you for a deficiency judgment - ask a bank workout officer the las time they've won one of those cases -- yes your credit could get ruined but hopefully by the time this property goes south you've made some cash and leveraged it into something else -- I say go for it and try to avoid a person guarantee if possible!", "replies": [{"id": "dfvcnr9", "text": "&gt;This is good advice but with a 100% loan, the finance / bank guys stand to lose way more \n\nlol, this is not a bank loan; hard money all the way. no conventional lender will do 100% financing.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "dfuf5p0", "text": "Is it retail, industrial, or office? Is it outside a major city? Top 25 city? Or rural town? Lots of variables to look at to get a general sense of what you should or shouldn't be looking at.", "replies": [{"id": "dfufefo", "text": "It is retail and I live in the same town. I am very well aware of the market and I believe it would be a good investment. ", "replies": [{"id": "dfug6ui", "text": "Your bank probably won't lend to you if this isn't the case, but are you prepared to have a vacancy of 1 year and then have to put 500k cash into the property to secure a new tenant?", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "dfujuku", "text": "Retail sector is tough right now - make sure you get an appraisal, Alta survey, and research zoning code (namely allowable uses in code and if you can get a drive thru or if you need a special permit to get a drive thru) - see if you can build up and go multi or do a drive thru \n\nIs it an acre? Most sit downs need an acre for ample parking ", "replies": [], "depth": 1}, {"id": "dfvvjam", "text": "Where are you getting 100% financing? I work for a CRE lender (bank) and we primarily do perm financing. Banks aren't allowed to lend above 80% LTV on CRE. It's hard to imagine a hard money lender will even do 100%. I guarantee your Lender will foreclose immediately at the first sight of any problems that may come, as they tend not to do workouts. \n\n", "replies": [{"id": "dg5edbn", "text": "Banks can lend up to 85% LTV. At least the bank I work at here in Florida. ", "replies": [], "depth": 2}, {"id": "dgdve12", "text": "CTL financing...really aggressive stuff.  ", "replies": [], "depth": 2}], "depth": 1}, {"id": "dg2vfnx", "text": "Buy it now.", "replies": [], "depth": 1}, {"id": "dg3d5b9", "text": "Is this a \"Zero Cash Flow\" investment? Even those at 100% assumable debt have % over the debts of no less than 12-13%...", "replies": [], "depth": 1}]