All Forum Posts by: Joel Owens

Oksana and I connected a few months ago. The range to buy is smaller than I work on. I sent her a copy of my free book believe.

Oksana I have colleagues that work in the smaller ranges that I could connect you with. Let me know. 

My minimum these days is about 3 million in price and up for STNL. 

Hopefully you have a provision in the lease where current tenant stays on as guarantor for the lease when they sell the business unless you the landlord specifically agree to release them.

That is there for a reason.

Say I bought a QSR with a 200 tenant operator with guarantee on the lease and I paid a certain cap rate for it. Now that QSR wants to sell one location to a small franchisee with more limited experience and net worth. My risk factor just went way higher with no compensation to the landlord while the 200 unit operator is likely getting a pretty penny on the sale if location is good.

To the other poster above I might want a vacant building if current tenant is paying way below market rents and I have high upside in a good area. if area is weaker it's different. Everything is case by case basis for decision making in real time.

No legal advice given 

If you own the property contact some local retail leasing brokers for a (void analysis). You will hear multiple opinions as to what to do.

If you own the land check the deed restrictions or lease restrictions with CVS. Certain uses might not be allowed. Also there can be REA association docs for example if this is an outparcel to a shopping center that comes with many rules and restrictions.

You can lose your ***, breakeven, maybe make some money but it's a steep curve if you do not know what you are doing. Get with at a least a commercial retail attorney and retail leasing brokers to try and get a feel for the possibilities.

Without knowing your full financial picture and goals everything is just speculation as to what might be optimal or non-optimal investment because it's based on the person.

Look at the topo. Topo if really hilly or lots of rock to move can get very expensive with blasting out dirt or having to backfill with large retaining walls.

Example you could have 6 acres bought at 200k an acre and think that's better than the 300k an acre property UNTIL you find out that 300k an acre is 100k per acre to get site ready and the 200k one is going to take 300k an acre. Lots of other factors. 

In NNN about 20 years now as a specialist. I do not do any leasing I have retail leasing brokers do that for me when I own properties.

The .75 acre lot first you need to know how much of that is usable to build on with set backs. it could be much more than current building size. You also need to look at parcel shape. An irregular shape makes parking and access harder to work. Look at daily traffic counts going by the site is it 20,000,25,000,30,000 cars per day or more?

Is the property on the going home or going to work side for traffic? Is the property on a hard corner or next to a property on a hard corner with easy access points for in and out?

Is it the main retail commercial node in the area or is it middle of nowhere out of place?

Is the building road frontage or back behind other buildings? Any large back anchors like Wal-mart to drive daily cross feeder traffic to the site? Can the existing piece of land be assembled with adjacent land to make it bigger? Bigger parcels tend to draw more tenant types these days for their business models.

I still buy less than 1 acre parcels but has to be good price and good location with well laid out dirt.

The 30k cars per day traffic you could have only 10k on your property owners side and 20k on the other. is there a median blocking traffic from one side getting into your property? If so consumers are lazy and do not want to turn around just to get to a place. Are sightlines horrible like property road frontage but sits high up on a hill or low down in a hole?

You need to determine if a national tenant, regional tenant, large franchisee, small franchisee, or mom and pop would want the site. The better tenants tend to pay higher rents per ft but want the strongest and best locations. You go down the tenant credit to no credit stack those tenants tend to get the scraps where they will take almost any site in an area. Occasionally they will land a diamond for themselves as a mom and pop tenant but it's more rare because if I own a strong site I would take more rent, better tenant, and exit at a lower cap rate making more money than a risky mom and pop tenant.

How old is the building? Sometimes you can retrofit the outside versus building new as building new is very expensive. A tenant might not even want the building they might want to tear that down and ground lease and build new again. Once building is weird shape or layout or a certain age it's easier to demo it and build all new. Buildings older than 15 to 20 years tend to fit that description more.

When I buy sites we sell some of them after owning a few months to another developer that the tenant prefers or the tenant itself. We can also hold and build to suit, re-rent existing building with tenant improvements to exterior and interior, or ground lease.

We are buying cash about 3 to 4 a month. Lots of overpriced garbage out there so we go for more quality than quantity.

Rent comps go on CREXI or Compstack. Look at active properties on the market for sale. They will often disclose rents tenants are paying in the market and you can kind of get an idea that way.

If you have never done retail leasing before it is a heavy lift and need experience or it's a disservice to the seller. Try to partner up with someone local if you do not have the experience and learn as you go along if leasing is something you really want to focus on.    

If we find a seller financed deal where they have no debt or the down payment would pay off the debt on the commercial side then I typically structure this way.

5 year fixed debt in the 4's for 30 year amortization.  If the seller finances below prevailing interest market rates then the IRS could have imputed interest provisions but that is for the seller to decide on and discover.

Put a clause in there that when market interest rates fall to 4.5% or lower for a period of 60 days and a similar amortization schedule is available for at least 5 years fixed then borrower will refinance the seller out of the seller financed loan BUT if 5 years pass and rates are not 4.5% or below then an automatic extension of the fixed rate note for another 3 years.

This way borrower not getting hit with a monster market interest rate reset and having to put a ton down to refi. Instead they are getting additional years for paydown, refi, sell-off.

Commercial properties that meet this criteria for owner finance maybe 15 to 20% of the market on the commercial side with a substantial down payment maybe 50% or more. 

Some people in it longer than me I have been in real estate about 20 years now.

I looked at tons of strategies residential and commercial. Went to commercial and never looked back.

I like vanilla deals. I learned long ago the more complex something is the more things can go wrong.

Decades ago people were chasing the first easy million and the same seems to ring true today. People just need to accept it's smart work, timing, etc. to make millions, tens of millions ( no magic pill). Investors making tons of money do not need to sell people anything. Why in the world would I want a 1,000 people I have to mentor that have no clue what they are doing for say 5k a pop. It's 5 million gross before expenses and then you have endless calls and taking your time.

I have a news flash for everyone. Money can be infinite but time is not. 48 years old now. Making the next million is nice but doesn't motivate me to log long hours. You get so much wealth and start getting older you enjoy the business but focus on quality of life more and memories. 

Due on sale if the lender calls it the cost of capital for lenders now is much higher than in the past so they would not make that much relending the money out. If a bank has to pay out 5% to get deposits then they usually want 7% to lend back out or it's not worth their time.  

People need to quit chasing the quick buck with a promise of fast wealth. That's a house of cards ready to fall down fast. 

If the new business owner wants to change terms of the lease if you are not responsible for the repair or replacement then great fair game to start changing key provisions to more in your favor.

I will negotiate to get more than I give or I will just leave as-is. The previous business owner can always pay for a new A/C to affect the sale if landlord not responsible.

You need to look at your lease and see if it says repair/ replacement or both is landlord responsibility or if there is a amortized schedule landlord is on hook for some estimated cost based on years of service and tenant has been there for.

More importantly than all of this is WHO is buying the business? Are they better credit tenant or franchisee for liquidity and net worth? If not you better hope lease language allows you to keep existing tenant on the personal guarantee if they have one. Hopefully not just a 1 unit llc guarantee they can remote bankrupt and walk way.

No legal advice given. 

People often want NNN to pay more cash flow but this is passive investing and not active investing so the difference is wide between yields.

You have long term lease with lower yields or properties like I buy all cash with heavy value add. There is not much in between because the sellers have no reached a pain point to let it go at a good value and still hoping for a turn around to their situation. You can still find those deals but are very rare like a Unicorn. If you do find it often it's an estate sale where they want to dump it quick and get the money or a REIT that owns much larger properties in portfolio and do not have the time to turn around the smaller property.