All Forum Posts by: Joel Owens

If you are interested in retail centers one of the better books is Investing in retail Properties by Gary Rappaport a friend of mine.

If you are interested in single tenant retail I have a free .pdf book on my website I wrote on NNN 21 years so far in the business. I used to own retail centers.

Too much management for me. Retail centers are typically the second most passive of investments and single tenant NNN the most passive. Multifamily buildings are a lot of work even the large ones and you have unpredictable tenants with residential government regulations. Some people that are investors love that stuff but not for me. Even owning hundreds of unit you have to ( manage the manager ) and if you invest in multifamily syndications you have to ( manage the syndicator ).

Good luck  

Have been in NNN 21 years. I own properties across the county and my clients do as well.

Most Dollar Generals are WORTHLESS investments. WHY?

They are in tiny towns as I call them and have little to no dirt value. For example if you buy a 1 million DG in tiny town and 8 years remaining lets say cap rate is 7 and you pay cash.

You collect 560k over 8 years and DG does not renew the lease. You have a sheet metal sides and back building that no other tenants usually want because it is built cheaply. The land might be worth 100k as other investors want strong suburban to urban core areas for investment. 560k plus 100k is 660k when you paid 1 million. Even with tax depreciation you are upside down on the investment.

Diversifying for the sake of diversifying is a bad investment. It can be better to have 1 better location property in high demand for the dirt than 3 mediocre sites that all have little value in the dirt. 

Why do people buy these DG's then? Because it is tiny price point and investment grade tenant and lenders will give loan to them. Lenders do not typically care about long term value they just look at getting paid while they have the loan.

If you buy DG or Dollar Tree stick to strong suburban towns to urban core where dirt has value long term. Those are more 2.5 million range to 3 million and 5 to 6 caps but long term investment value for return is often higher. They often have brick construction on large lots with high traffic corner intersections.

If you do not want to put 2 or 3 million into one property then instead of owning 3 dump DG's in tiny towns with little value long term you might want to invest with syndicators if this is not 1031 exchange money.

Example on my single tenant stabilized and value-add deals we pay all cash. My limited partners invest 200k or more at a time. That way you can diversify and own a percentage of an overall investment with much higher quality dirt in stronger markets where the chance for equity growth and appreciation over time is superior to tiny towns. Most investors when you exit are not looking to purchase in tiny towns so that makes cap rates rise in those smaller markets and harder to sell later on.

Depends on the broker. I can't buy all the deals. Buying deals takes time. I have my family, my health, etc.

There is only so much time in the day. What is a deal also is relative in the eyes of the buyer. Some might want only 7 million price point in a certain market. Some might not want a high cap rate with work involved to create more equity. They might have tons of money already.

I have some clients that with their business net to themselves about 5 million a year of personal income. What they do not have much of is time. I have talked with thousands of millionaires over the decades from all walks of life and different stages of their investing and ages. While they share some commonalities no one investor is exactly the same with their goals or their life story.  

Because the guru's want to teach the newbies to look for deals knowing they have very little capital. Then when the newbie finds mostly junk but occasionally finds a gem they might go in and partner with them.

Finding a true deal is the hardest part. If the deal is good the money is there. Newbies think they have good deals but most times they do not know how to underwrite properly. The people likely charge for the courses to pay for the back end staff selling the wares for the courses and then to pocket a little change.

I don't like selling courses for what I do NNN because an investor often with very little funds wants the world for 10k or 25k fee to teach them. I make six figures per deal for my time whether finding something for someone to buy NNN own direct or my GP fee on my syndication properties I buy with cash.

Some people just like selling courses and creating all this junk. They tend to milk the masses on the pipe dream putting on credit cards.

Sorry. That sounds like a pipe dream. I have been in NNN 21 years and never have seen a seller carry for 25% and then the lender providing the other 75% as first position with a loan.

You would have no skin in the game. 

Cap rate value is tied to the length of the primary lease term of the NNN leases. Generally lenders want 7 years or more remaining primary lease term. If multi tenant building some leases might can be 3 to 7 years term for weight average.

Sorry Hul for your losses. Often investors diversify thinking there is less risk. One good deal where 400k invested goes to 800k in 3 years can be better than 4 100k deals where 3 go belly up and 1 is barely still hanging on.

I also get this conversation not only in my syndications but when my clients also want to own NNN direct. They think instead of 1.5 million down into 1 4 million dollar property they should buy 2 or 3 smaller properties. I then have to explain they are buying the dirt with location for value long term overall value. The smaller properties will be diversified but they are also WEAKER. Long term they have little land value in small markets.

So I tell people don't just diversify to diversify make sure the investment are strong locations and if you can't afford multiple of the strong location then better to have 1 stronger location then 3 weak ones with limited upside.

When you invest in syndicators look at their exit track records. If they do not have one then it's gambling money where the pref return and the upside split to LP must be high and the investment amount must be low like 25k or something when net worth is 5 million. New syndicators without exits are a roll of the dice because you haven't seen if their initial thoughts and projections came close to being true or were way off base.

What I want people to remember is be careful investing in syndications that use debt with larger properties. Those syndicators often have to time the market cycle because most of the buyers on the back end use debt.

With NNN if you have a superior location there are a lot of cash buyers who have already made their money in life and want passive returns and pay low cap rates. They do not use debt very little if at all so rates do not really affect them. So your exit values are not heavy debt dependent with timing.

Reverse exchanges are more involved and cost a lot more money than a traditional 1031.

My clients I sometimes suggest they put in a 30 day seller extension option after the buyer goes hard with the earnest money that is buying their property where they have passed due diligence. This can then give 30 days before they close the sale of their property plus the 45 days in actual exchange period.

When buying NNN seller want you to either have passed DD selling your property with non-refundable EM checking down to closing or in 1031 ID period before considering an offer. The diamond NNN good stuff gets multiple offers and doesn't last.

If you are just putting your property to market for sale with your 1031 exchange and have no offers or have an accepted offer buy buyer can still back out in DD the sellers of single tenant NNN do not want to consider going under contract with you. That is for the great properties.

The crap that is mediocre or bad sits on the market in NNN and THOSE sellers will often consider going under PSA in your early selling of your property but that is because they are selling stinkers of a property.

Be careful of new builds with merchant NNN developers. They often sell the dogs fast they do not want to hold long term and keep the good stuff waiting for the strongest buyers willing to pay the lower cap rates for the diamonds. Those buyers often do not care if the property throws off a 4% cash flow or a 5% cash flow to start. As long as it beats the bank and they eventually get rent bumps they are fine because they already make millions of income and main focus is depreciation and cash flow is number 3 or 4 on the list.

DST's have an EVENT HORIZON mandate where they have to dispose of a property by a certain timeline.

So one DST overpaid and I am offering 1.5 million dollars less with cash purchase to buy it from them.

That is why I do not like properties with debt on them or these DST's where they have to time the exit. Some of my clients bought at 5.25 cap rates when debt was at 3.5 and they did fixed for 10 years with 30 year amortizations and had a healthy amount down to start. So by the time the loan comes due they can just pay off the tiny remaining balance and do not have to sell.

Debt can be good in certain situations if you use it properly but if abused debt with commercial properties you could lose half the investment having to sell in a non optimal time in the market.  

Have Thursday 3 Eastern time. You can inbox me here or reach out on my website and fill out the contact form.

Depends on your goals with syndicators. For my syndications I raise all cash. I don't want to be a slave to the debt markets. 

When you pay cash you can hold the cards more as to when to exit. Pay special attention to syndicators that use DEBT and how they STRUCTURE that debt. Interest only loans, floating debt, short term fixed debt, etc. are all time bombs ready to go off at any second.

Most of my properties purchased with NNN are sub 10 million. I have a huge buyer pool for buyers looking for stabilized assets for passive wealth on the exit. Take that versus multifamily or other projects where syndicators like to use massive LTV debt so they have to raise as little as possible from accredited LP's. Their pro-forma's are often crap and few materialize like they say.

If you have a 50 million multifamily when you get upside and sell for 80 million eventually you better time the debt cycle and asset class cycle just right or you will get your as$ kicked hard which is what is happening to lots of syndicators that do not have decades of investing experience.

A property should stand on it's own without debt and still make sense. If a syndicator has to use exotic debt to make a deal look appealing run the other way fast.  Those big properties on exit have a very small pool of buyers that also use heavy debt and are sensitive to interest rates.

Good luck