The pharmacies are mainly a tax asset and future income stream for retirement. Those loans are non-recourse and you can get a new loan with a BTS or buy in and assume the loan with an equity down payment.
Now there are value add plays where instead of a 5 to 6% cap there is say 5 to 10 years in the primary lease. You can get those at a 9 to 10 cap return. The problem is you are paying cash (millions of dollars) or to make the financing work you are having to pay a ton down 30 to 40% so that the loan is zeroed out when the primary term ends. The pharmacy renew over 90% of the time but a lender doesn't want to take that risk. There are shorter term financing for bank loans on the pharmacies but then with no increase in rent bumps in the primary term you run the risk of the loan coming due before primary term ends and be in a negative cash flow situation.
Banks, restaurants, dollar stores, auto stores throw off annual rent bumps in the primary term and caps can range from 6 to 10% starting. Now with Mcdonald's those trade at crazy 5 caps. Foreign investors buy those for cash and a investor getting a loan the amount down to make the DCSR work doesn't make sense.
An Applebees for example you can get a brand new 20 year lease for asking of say 2,400,000 and the starting cap is a 7. Has annual rent bumps built in of 2.25% with DSCR of 1.25 you are typically putting 25% down. Cash flow increases every year with the bumps and equity build up occurs from principal pay down. You don't have to worry about tenants, toilets, and termites no living up to their agreement. This is for a corporate store guaranteeing the lease. Of course with a franchisee you have to look at many other things as the risk is greater but usually rent bumps are 3% a year and cap is higher starting off to compensate for the risk.
Soon I will start a BP blog on NNN investing.
Mom and pop type value add for NNN I do not get involved with. The price point is too low, a bunch of messes to clean up to close the deal, lot's of time involved and low return, and financing is harder to get.
This is just like vacant apartment buildings. I do not do those anymore also. After spending months and months negotiating water liens, and multiple loans etc. and the units needing total gut rehab making an 8k return is too small.
I can just as easily work on semi-performing apartment buildings or fully performing and put the same time in and make a much greater return for my time.
So for 2,400,000 25% down is 600,000 before legal and closing costs and due diligence. Usually my clients that want to buy this type of property want less risk and to get a happy yield but do not want to take on a job. The type of vacant NNN mom and pop type deal is a job where you will have to be hands on to get it performing again. Most of my clients barely have time to breathe they are so busy and just want something that goes and they collect a check.
You can find small NNN deals sometimes like a Pizza Hut for 300,000 at a 10 cap or things like that. The more urban areas and markets like Cali or New York the caps get compressed further. The suburban markets with strong demographics is where many of the good buys are. The big institutional buyers in the urban areas most investors needing to get a loan with some down will not be able to compete with all cash and a quick close for those trophy locations in the urban core.