I am buying my first NNN and wanted to understand the process better. To start with I was curious about the folliowing:
1) I know the Seller pays the brokerage fee, but I would like to know what brokerage fees typically are for selling a NNN? Is it lower past 1M in price?
2) Is there a database of NNN properties, like a MLS? Or do people and brokers find listings just from email lists?
I am a principal commercial broker and investor myself. I own my company. I have clients nationally all over the U.S. I review between 500 to 1,000 retail properties weekly to find matches for my clients.
The bigger real estate firms tend to have 3 to 4 people on a team and represent the seller and their interests. They tend to only mainly push the properties to sell that they have listed in their inventory whether they are bad,good, or great properties.
What I do is different. I have a database of my own with many thousands of owners nationally and I look through them to find the best properties for my clients. My fee is written into the LOI and paid by the seller in most cases.
There is not really a central MLS for NNN. There is Loopnet, CREXI,etc. that have some properties on there but not a majority of them.
The broker fee is negotiable. Some brokerages that list lots of properties at a time from one owner may give them a special rate. As a buyer it should not concern you what the seller is paying out unless you are a broker buying for yourself.
The higher in price the total percents can come down sometimes. 1 million in NNN is like buying a 50,000 house and not much worth anything is available.
I usually have potential clients fill out a PFS and then we jump on a call after I review it. it also makes a difference if you are completing a 1031 exchange or not or if cash is sitting in the bank ready to go.
Thank you for the answer!
I am still curious what the average commission is for a NNN above 2M. I know I am now the buyer, but I would like to know so I know what my costs are in the future if I sell.
Typically newly minted NNN leases are from 10 to 25 years primary term. When you buy most will keep at least 3 to 5 years. No way to tell what commissions will be in 5 years from now.
Commission amounts vary where if the broker is double ending it or there is another broker on the other side. There are some discount brokerages on fees out there for volume but that is not my thing.
On resale 2 million plus maybe as an example 5% total with 2 brokers involved. You are only selling one property. Some developers and institutions might get lower percentages but they are listing tons of properties each year so that is a volume business versus a one off sale for the brokerage firm.
@Sara K. , There's not a standard commission on sale other than what's negotiated between the listing broker and seller.. But there's a range. I'm involved with 2 very similar transactions right now on very similar properties both in the $8 million range -both in Florida with two different listing brokers. Listing commission on one is 2% split between selling and buying broker. One is 6% split by listing and selling broker. 4% is very common and as you can see is in the middle between these two that feel like extremes to me. Again this is at a level for the high range of assets. The lower the sale the more % the listing broker will want to get as compensation for the effort to keep things equal.
Sara, Some more info for you on NNN MLS. I am a principal at a firm that has been developing these type of properties for 30+ years. Mostly drug, national restaurants, and grocery. I find that these rarely hit the loopnet, etc. This niche has been hot enough that the brokers generally can't come up with enough product to satisfy demand from the purchasers they already know. If they can get a deal done quickly at a price their client is satisfied with, no sense putting it on loopnet and dealing with more headaches for same result.
Excellent topic. If you don't mind, I'm definitely sending you all a connection request. I know of a fund/vehicle that could use a Pocket/Napkin NNN listing(s) in the near future.
I'm trying to venture into NNN properties investment as well. It's great to see all the resources and support for new investors on BP. Do you recommend for the investor to visit the NNN property if it is out of state before acquiring it?
If you are new to NNN there is a TON to analyze finding the right yield, tenant, location, lease term , lease guarantee,etc.
Once you own it you can be quite passive with the asset type. There is work leading up to the purchase and closing of the property.
The commercial retail buyers attorney generally does not help with the search they help with the transaction and forms once you find the property to buy. For the search a NNN buyers broker helps sift and sort through the properties to help and analyze to locate the right one. Listing brokerages often just try to sell what they have listed and do not have the time like the buyers NNN broker to work with you directly as their client to look through many property owners to locate the best properties to buy. Often the listing brokers are selling whatever they can whether that is a bad, marginal, or a good deal in their inventory.
Cap rate and type of tenant base with NNN will often be dictated by type of tenant, price range, and location (warm or cold belt states), & (rural,weak suburban,strong suburban, or urban core).
As far as visiting the property some of my clients do and some do not. If the type of tenant is local mom and pop then getting a feel for the local town might be needed. If it is a national rated BBB- or better investment grade tenant on a hard corner with a traffic light and back anchors with high daily traffic counts then it's up to you. It's all subjective to your personal comfort level and how much due diligence you want to do.
My clients when we look nationally say they will look out of town but maybe 50% still end up buying local to them. Not because we did not find good stuff in other states they just decided they could only handle owning where they live. A lot has to do with their income levels. If they are worth 5 million buying a 2 million property and make 500k a year then plopping down 750k down payment out of state usually doesn't bother them that much. If someone is worth 2 million putting down 1 million to buy 2 million property and makes 150k a year they might be more skiddish putting so much of their net worth out of state on a property that is not local.
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