All Forum Posts by: Joel Owens

Princella could have saved you a bunch of time. 20% down on NNN doesn't exist that is a pipe dream.

When interest rates were 3.5% many years ago cap rates were about 5%. Even then the best you get in with is about 30% down for long term lease. Some doctors worth 20 million making 1 million a year with a local bank they hold deposits with I have seen 20 to 25% down but they personal guarantee and cross collateralize all assets and give 20 year amortization schedule instead of 25 or 30 to have faster loan paydown. These types of buyers do not need the money they are buying for passive returns and tax purposes. 

Today for interest rates 5.9 to about 6.4% for NNN you need about 40 to 45% down because of DSCR ratios because cap rate is low 6's to 7 cap at best. Low sub 3 million range most cash buyers trying to beat the bank at 4% so buy 6.0 caps all day long.

Most Dollar Generals are crap. They are credit grade tenant but sheet metal sides and back middle of nowhere. The good ones are upgraded construction in strong suburban to urban core areas or Dollar Trees that have taken over old Walgreens locations on hard corners with upgraded construction. That's maybe 10% of them out there. Rest are usually junk.

TIC is ( tenants in common ). You have a TIC and then a DST ( Delware Statutory Trust ).

The DST's were created from a bunch of TIC failures within the last few decades.

TIC's can work IF there are a smaller number of investors. When you get into large TIC's with lots of investors that use debt it can get complicated. Unlike a DST the TIC members have voting rights. If there ever is a decision to be made with a property you can have infighting with capital call injections, placing debt for loan or refi, when to sell, etc. During this time the assets value can plummet because of stagnation between the investors.

The DST one person controls the ship.

1031 DST and TIC shares are easy to get into but very hard to get out of if you ever need to sell.

It can work sometimes if the proceeds are small like 500,000. With 500,000 you can't buy own direct for yourself really anything good in NNN. So you could own with 500,000 a fraction of a Wal-mart in good location that you could not afford with 500k proceeds to own 100% yourself.

What you give up is control. I mention to people if your net worth is say 3 million and you are putting over 1 million into a DST or TIC that can be a bad move as you are giving up control with a high percentage of the money you have. Yes you have voting rights typically with TIC but so do the other investors usually so the control is not there.

If the TIC is simply a small percentage of net worth like 500k in when net worth 10 million and make 1 million a year and the person just wants to get passive then they might be a fit.

DST's are heavily laden with front fees as high as 12% sometimes. The DST buys down the interest rate front loading mortgage origination fees.

Sometimes people can buy a retail condo for interest in a shopping center in a good area for the 1 million dollar range. Again in that situation the NNN investor is not typically the controlling declarant (majority owner) of the association so you lose some control over your asset.

There are no 100% answers just varying answers depending on the individual investors risk tolerance and desire for control. I hope your works out well for you. I have seen many TIC's implode over the decades. They can work sometimes but the operators of the TIC's really have to know what they are doing and pick the right properties with the right group of TIC investors so the synergy works properly for a chance at success.

Go to my website. I wrote a lengthy book on NNN properties. I have to update it for todays interest rates but have been too busy.

It's free to download.

As a broker in NNN 21 years and owner of my company what I would say is DON'T RISK your buyers hard earned dollars with the inexperience of not knowing NNN.

Residential brokers and agents see commercial and think whopper of a check compared to selling houses.

You need to refer this off to someone that has experience and not wing it with your buyers hard earned cash. They could lose some or all of their investment not buying right with NNN. Lots of trash out there. Experience and wisdom teaches the winner NNN properties from the duds. You can't get that reading a book you have to live it.

I am a believer you should stick to one thing and be a world class expert at it instead of knowing a little of everything. That creates lots of liability often with poor results. 

I have been in NNN for about 21 years. I am a principal buyers broker meaning I own my own company.

I also am an investor and own NNN properties around the country.

Need to look at home many properties you are trying to 1031 exchange into NNN and if they will all sell at the same time.

Next look at your expected proceeds. 2 million NNN is like a 200k house it is starter range for good suburban area for dirt and tenant.

Without knowing your expected proceeds, cash on cash returns expected, and price point can't comment further.  

The problem with multifamily and larger deals is they are often porked up with debt to the max LTV possible to induce investment by LP's pumping the projected returns.

Upon the exit for sale or the refinance the result could be disasterous because they are a slave to the existing loan and the debt markets.

Also the exit buyer at those larger levels is almost for certain using debt to purchase. Even if they have the cash they do not want 50 or 80 million of their cash in one property. The want to geo-diversify the income stream. Now there might be one in ten thousand property in A+ market someone at that level would pay all cash for but that is super rare and not how most multifamily syndication markets. With multifamily if interest rate rises, rents flatten, and insurance, property taxes, and maintenance are more than expected the predicted returns to gain initial investment are toast.

It's why most of my NNN purchases are 6 million and under. I know there is a high chance of a cash buyer or low LTV like 30% to purchase. The high interest rates if using 30% LTV they can still pay a low cap rate for exit because interest on loan is so small the cash on cash is still often good. The exit multifamily buyer most of them are YIELD buyers. They want yield and big equity growth for taking on a headache asset class. They are not like a NNN investor who has already made lots of money and wants a passive return. There are advantages and disadvantages to each asset class. It's more the way the syndicators pumped multifamily deals. There are posts I answered many years ago saying the multifamily is fixing to be a game of musical chairs I have seen it all before. People kept saying multifamily is indestructible blah, blah, blah. Their ignorance in the name of trying to make money shined through. I know some that did very well with multifamily but timed the exit just right and even when they did great they did not want to do it AGAIN taking 5 to 10 years of their quality of life to produce that yield. They wanted something more headache free to enjoy their life.

NNN can also be overinflated. I often only like maybe 10 properties out of every 1,000 I review. The developers know they develop trash and sell off fast as possible and then hold the diamond tenant and locations to sell later at the best cap rates. The weaker tenants they sell quickly to get the money after getting the tenant open and operating.

Little to no activity equals PRICE, CONDITION, or BOTH. Blaming the agent is just a scapegoat response. Even if the agent sucked and the price was good you would still likely have offers.

Being it's in your in-laws would not touch the situation with a ten foot pole. Sometimes financial gain is not worth what is attached to achieving it. 

I don't want to say this but BP in a lot of ways has turned into a spam fest now. I liked the old days decades ago for the site. Most of us no longer post as we are so busy with our businesses, semi-retired, or retired.

I am still active but only work about 25 to 30hrs a week. Turned 50 this past December. Time catches us all regardless of the net worth or liquidity number. The young bucks trying to make the first 100k to 1 million are after that initial investment high of success. They tend to work any hours 60,70,80 a week to try and achieve it. Later on in life when you have a family yourself, aging parents, etc. how you live is different. TIME becomes a primary focus and making sure you live life daily that makes you happy and not necessarily the most money. You can become a slave to the machine of trying to create more money at any cost ( health, family, friends, etc. ) all to try and hit a certain number and say you did it. That hedonistic high wears off pretty fast and is short lived. Altruistic giving back when you have more money than you need tends to have more longer joy and happiness attached to it.

On coaches most of them are (system packagers) where they regurgitate information put together in pretty bow to wow people that this time they will be successful if they just buy this stuff. Why do they do it? Most do it for recurring revenue while they source deals. They also take the students as use them as ( ants marching ) to source deals hoping they dig up a diamond as sourcing is the often the most time consuming part ( finding the deal ).

I do not mentor people by choice with the coach stuff. LP's that invest with me on my syndicate NNN deals learn as they invest with me as I answer some questions along the way. Same with clients where I am the principal broker and buyers want to own 100% themselves instead of the syndicate or they want to do both. I help with that but I don't sell programs or pack people in a room to sell them a system.

Someone highly successful just does not have time for that on a consistent basis. Even if they create the program they have the grunt workers pushing the daily training. 

If I make 200k per transaction own direct or up to 1 million in total value for each NNN property I syndicate I have no interest in selling a 10k or 20k program because I know the amount of work that person will expect from me is a ton. Doing that would COST me a bunch of money in the TIME suck. People that might be worth 100k, or 300k the 20k is a ton to them.

It's not like they are someone making seven figures per year already.

If you want a mentor really deciding the asset class you want to specialize in and finding someone more local to your area can be KEY. Often the cost is striking up a friendship, doing small tasks for them to lighten their load, paying for a lunch or dinner to gain knowledge, etc. If they see that fire in you ( which is typically 1 in 1,000 ) they might see you as someone worth pouring into for the next generations of investing. Highly successful people don't want to keep the knowledge to themselves. They want to share it but make sure the right and motivated people who will cherish it and use it are found before expending time and energy on them.

All these package programs tend to be more national in scale because they want to appeal to the broadest audience to BUY IN. Biggest net = more fish to feed on.

Local tends to have more specialized knowledge how that market works on a detailed level. I am talking in generalities and NOT about the poster starting this post with her company association. I know nothing of that company.

A mentor program is not a quick fix for wealth. In fact personally I believe in a lot of ways taking the time to read and put in the work yourself shows you are ready for the journey of success not only in real estate but in life. It's okay to have a guide but they won't do the work for you. Once your wealth gets substantial I find many people want the simple life. It's not about the highest return. It's about the perceived safest return on investment and the one that is the most headache free. 

Lookup up your regeneration of capital monthly and yearly. If your net worth is 100k and took you 10 years to build up and now someone wants 25k of that for a program that might not work out the cost is too high. You could use that 25k to buy your first property ( hopefully correctly ). If you buy the wrong one it could derail you for a decade. Sometimes the smartest move is no move at all until better opportunities come along. 

If you are sitting on millions and want to take a flyer on a 25k program then if doesn't work out it becomes a potential tax write off and income from business or other investments typically makes it up in very fast time if you have millions out already invested.

Investing school of hard knocks 21 years so far.

Good Luck

Been in commercial real estate 21 plus years and a specialist in NNN.

Investors getting started look at dollar stores as they are often only investment grade tenants in those tiny price points. 1 million dollar NNN like 100k house. Nothing much good in that range and when there is it goes for cash fast.

Most dollar stores sheet metal sides and back in junk areas. You are collecting a cash flow stream from an investment grade tenant but the property itself for land and building is almost worthless when it goes dark if they do not renew the option periods.

If the DG is NN lease the tenant will limp along repairs and then go with new developer for new building rather than exercising option and having to pay all that capex coming due. The sheet metal building will not be appealing to 90% of tenants that would want to go on the site if any did at all. Often in those small towns if DG vacates no national brands want the site just jo-bob small business owner who wants to pay 50 to 70% less rent than DG did.

The better DG's are buildings in strong suburban markets with upgraded construction or they moved into a vacated pharmacy store on a hard corner. Those are more 2 million and up in price.

These days if someone contacts me to work with them buying NNN I do not touch anything usually under 2.5 million in price. The location just isn't good in the smaller ranges. I believe in the quality of the dirt for location first, then tenant, then lease terms, etc.

You might could say the new lease rate was the BASE AMOUNT increase verbally and then add a percentage rent clause above a certain annual sales threshold. That way if tenant does exceptionally well you both win. If they have a down year the rent is reasonable for them to keep operating. No legal advice given.