NNN - Commercial Real Estate Investing
I am a huge fan of these BP forums and have learned so much! I feel like I am in the "analysis paralysis" stage though as I have been studying real estate investing for over 5 years now.
I first was interested in duplexes, fourplexes, etc...but this past year have become more interested in CRE as my first investment. After some mentorship from a current NNN Jack-in-the-Box owner, I see it as a great investment.
So my question. As someones first NNN real estate investment, is it better to go for a high cap rate, low cost, low lease years remaining property, that has great financials and will most likely renew in a few years....OR invest in a higher price, lower cap rate, long lease in place (where the lease will pay for the purchase price)?
1 - Starbucks: great corner location, drive-thru, 2008 build, lease expires in 4 years (2018), $625k price with 9% cap rate.
2 - Long John Silvers: ok location (off freeway, mall and Walmart outparcel), older 1980 build, 20 year lease, $1.3 million purchase price with a 7% cap.
-So my question is....should the lease MINIMALLY pay for the property (as the Long John Silvers would, plus some depending on my loan/downpayment)... OR is a short lease ok if the stores financials are solid and the high cap rate will mean a short breakeven (as the Starbucks would be paid off in 11 years at that cap rate).
I really appreciate any beginners advice on selecting my first NNN property. Thanks!