NNN seller financing?

Question

So I was browsing Crexi today and saw quite a few national tenant nnn buildings that were listed for 5-6-7+ months and was wondering what is the usual days on market for those kind of deals?

Tenants included CVS, McDonald's and Beacon Roofing Supply.

My main question is this: am I wasting everyone's time thinking I can get seller financing on the lower credit quality tenants such as Beacon Roofing Supply?

I understand there's no way/very little chance it would work on a investment grade tenant due to them being seen as more stable investments. Also those deals wouldn't work financially anyways due to lower cash flow / lower cap rates.

In talking sub 2m deals btw.

Sooooo, am I nuts?

Thank you in advance!

Ronald Rohde · Answer

There are absolute NNN leases that the owner is not responsible for large repairs. Vacancy or tenant lease disputes is really the only risk on those deals.

Frederic Babeux · Answer

@Ronald Rohde

I'm talking about buying in the US, was just comparing to Canada as I'm a bit more familiar with how lenders work etc.

Ronald Rohde · Answer

Ah, I didn't know you were buying Canada. Don't most people invest in the US ;)

Yes, installment sales allow sellers to pay less overall tax spread over payments received. If you don't have any savings, can do a seller finance on older low occupancy office or strip retail. Those sellers are likely most open to the concept.

Frederic Babeux · Answer

In an ideal world, I'd get seller financing for the down payment portion and then turn around to get a conventional loan for the rest of the PP. At least here in Canada, seller financing counts as ''equity'' for lenders as long as it is deferred (balloon payment or other deal). That would allow the seller to get say 75% of their selling price right away, allowing me to scoop some assets with low / zero down. For a full seller financing deal, you are right that there has to be some incentive for them to do it (tax incentive maybe? not sure how that works in the US.) At the same time, I'm not going after the best properties, we're talking the ones that have been on the market for a while. Vacant buildings I think you have much higher chances of getting seller financing because the asset is not performing.@Ronald Rohde I agree, zero percent chance someone takes that deal on CVS or MCD's. Just trying to find some ideas to get some assets without having to save up for the next few yrs / raise capital.

John M. · Answer

It's the wild wild west when it comes to commercial.  Some brokers leave these listings up there just so they can your contact info when you call. Next thing you know your getting spammed for all of eternity.  The truth is that the property may have been sold or is under contract. You can get seller financing on any deal.  It just depends on the seller.  With interest rates rising you should see more of these types of deals come to fruition as traditional financing becomes harder to compensate for the low cap rates especially on these sub 2 mill deals that are privately owned.  The odds are though that your still going to have to put some money down to make the seller comfortable.

Paul Britton · Answer

I don't think McDonalds usually rents any properties. They tend to own the land and rent to their franchisees. I'm sure it happens somewhere though.

Ronald Rohde · Answer

You might get seller financing if its free and clear. Rare, but not impossible on NNN retail/industrial.

I'd say 0 chance on the CVS or McDonalds stuff.

Scott E. · Answer

Great question. From my perspective, seller financing makes sense on a higher maintenance deal like a SFR, a duplex, a triplex, or a commercial deal that is  not NN or NNN.

But if there is a NNN lease in place, why would the seller entertain a seller finance structure? They are probably getting 8%+ return on their money at this point. And the investment is already pretty hands off due to it being NNN. So where is the value in flipping it to you and making ~5% on their money?

(I'm asking to add to the discussion. I'm genuinely curious as to why a seller would entertain this on a NNN deal.)

NNN seller financing?

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