I'm New to Real Estate and Ned Advice on a Triple Net Rental

4 Replies | Atlanta, Georgia

There is a property in a D class neighborhood near the Mercedes Benz stadium.  This neighborhood is in the process of being improved but I'm not sure to what degree and when the improvements will be at a sufficient level to have a dramatic effect on home value. 

The way this deal works is as follows:

1. They want me to pay for the property in cash because they are selling all their properties to get into hotels.  Cost is $365K.

2. With the house comes a 10 year triple net corporate contract where the company will pay me $3,000/month every month for the next 10 years.  They, in turn rent it out and make about $5,100/month.  I'm guaranteed the 3k for the next 10 years they cover all non-major expenses.  

3.  The CAP is 9.8%.  

4.  My concern is the true value of the property.  If it's much less than what they are asking for and I want to sell it in the future I may be in trouble. 

5.  The upside is if that areas develops into something nice it may raise the property value to something really good. 

Any help you guys can give a newb, as my son would say...lol, would be much appreciated. 

Updated over 2 years ago

NOTE: It looks like they need a cash buyer because the comps in the area don't support the asking price. They seem to be about 100K lower than the asking price.

I would:

(1) Get a third party appraisal on the property...

(2) Run the numbers not using their $3,000 triple net numbers but FMV rents and actual expenses.

That should give you a really good starting point and open your eyes to whether this makes sense or not.  If their $3,000 per month triple net falls through, you're left with #2.  It needs to work.

Thank you very much for your response Eamonn!  I really appreciate it  and I was thinking the same thing . I decided to not go with the offer  because the fair market value of the property  is low  and the rent they're asking for  I don't think I would realistically get

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Originally posted by @Eamonn McElroy :

I would:

(1) Get a third party appraisal on the property...

(2) Run the numbers not using their $3,000 triple net numbers but FMV rents and actual expenses.

That should give you a really good starting point and open your eyes to whether this makes sense or not.  If their $3,000 per month triple net falls through, you're left with #2.  It needs to work.