I am a partner in essentially a no money down triple net deal. Can anyone explain to me how equity is built up in a triple net deal? I realize as the tenant pays down the mortgage you end up with more equity in time. But is this realized equity that can be refinanced, pulled out and used to purchase another NNN? I realize this becomes an issue of recourse vs non recourse loans but any general idea is appreciated!
Nothing general about NNN investing.
I do not know of any NNN that is no money down.
At least on credit rated tenants and then the highest caliber investment grade.
You can take mom and pop type stuff and call it triple net I guess and maybe get into those zero down but that is not true NNN for what commercial brokers look at.
In true NNN about the best with lowest down is 10% for pharmacy ( CVS, Walgreens ).
I would have to no more about your current situation to comment further.
Thanks for the reply. I meant I'm the no money partner. I'm finding and putting the deal together and my partner will front the down payment
Bump. Any thoughts?
@Marc M. I'll answer this imagining you're the sole owner (partnerships can complicate things greatly, so this way my answer is shorter and clearer).
NNN only describes the type of lease, it has nothing to do with the property itself. So, like any property, the equation is roughly: Appraised Value - Mortgage/Note = Equity.
So, assuming that you paid all cash for the property, you can certainly "cash out" up to whatever LTV and under whatever conditions and terms your lender allows you. Then, take the money and buy another property (or whatever) if you so choose.
How much is your partner putting down??
Frankly I do not see what value you have in NNN if they are putting in the money. In NNN there is nothing to manage and you just get the check every month.
The money person has to be heavily vetted for liquidity and net worth. It's not just the down payment that is required.
", you can certainly "cash out" up to whatever LTV and under whatever conditions and terms your lender allows you."
I think that Marc is referring to a HELOC/equity line? It's very very tough to borrow on investment properties, unless you have an accredited tenant.
Well my "money partner" is a high net worth professional who wanted to invest in real estate but does not have the time or knowledge of the asset class to invest on his own. My father in-law has been doing commercial real estate investment for 40 years and has done well and has offered to be my mentor. As I am just starting out in my career (which is a high income career $200K+/year) I plan to invest in NNN leases to hold my wealth. I actually was thinking I could make a business out of investing my partners money too (which I have a few) in NNN leases. This seemed like a good opportunity to syndicate a deal between my partner and with the tutelage of my father-in-law, I could put a deal together where I can reap some of the benefits as well. And, my cash partner is ok with accepting a lower yield at the expense of my education. I don't have the capital at the moment but will eventually to do these deals on my own. It's a matter of getting started and I have a partner(s) willing to purchase investment property.
At first I wanted to do small investment properties (duplexes, triples, quads, etc) however my father-in-law, said for us to look into NNN leases. In fact, I probably could be a 50/50 partner in these smaller deals but that's not the point of this discussion. My father-in-law is actually helping me research properties to buy and teaching me along the way. So I guess my value is in learning how to appropriately buy the properties for my high-new worth partners and making it easy for them (they have no interest in dealing with these matters). In return I would learn the "business" and earn a little cash flow/equity in return. I hope this makes more sense. But my question was about my ability to pull out equity from one NNN to purchase another.
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