Creative Financing Strategies for Absolute NNN Properties?

Question

What possible creative strategies could you use to fund a Absolute NNN lease property for the down payment(roughly 25%), appraisal and environmental report cost, and closing cost? Could a commercial hard money or bridge loan be utilized and then refinance the property? Use of a private investor maybe? Any advice and honest suggestions are appreciated.

Jeff Kehl · Answer

@William M. Assuming you could do that why would you want to? Most decent NNN properties I see are priced only slightly above what I could borrow from the bank. So if you borrow 100% at 5.5% to buy a property at a 6 cap that is a very small amount of profit for the risk you take in owning the property.

And yes you could possibly do it with a syndicate or private money. But they are going to want what 8-10%? That's a blended cost of capital of around 6.4% you'd be paying to own an asset generating 6% PLUS there's the risk something goes wrong with the property.

Even when I analyze a NNN with say 25% of my money down they generally don't look like a very good deal to me. I know people assume they are a risk-free investment but look at people that owned a NNN Blockbuster a few years ago...

Joel Owens · Answer

The demand for STNL right now your strategy is doubtful.

The lender would not agree to the DSCR ratios.

I do know some STNL funds. Since they are major players they get maybe a 50 to 75 basis point premium on buying. So if going cap rate for Mcdonald's is a 5.25 they want a 6.0.

They tend to pay investors about 5% to start and then more as rental increases happen. It's a volume business on STNL.

Don Konipol · Answer

In any real estate transaction, the opportunity to gain a majority interest with no equity investment will only occur if at least one of these three criteria exist

1. The borrower obtains a personal loan, a loan secured by a property he already owns, or has such a high net worth that his signature alone is enough to obtain a loan of substantial enough size to pay for the property

2. The seller is so highly motivated that he is willing to do anything to sell the property

3. The property is purchased at so low a price to real value, and the discrepancy between actual value and purchase price is so transparent, that money investors are willing to put up 100% of the required funds for a minority ownership stake

While all the above scenarios do occur, they constitute a very low percentage of real estate transactions.

Chris Collins · Answer

William - Happy to discuss with you. You could certainly syndicate your equity. If you'd like PM me and we can walk through what you're buying and what type of NNN assets you're after.

Creative Financing Strategies for Absolute NNN Properties?

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