All Forum Posts by: Jeremy Cyrier

There are 3 critical issues to watch for in NNN leases:

1. Understand the credit quality of the tenant. This means that they have the ability to pay the rent that they've agreed to over the term of the lease.

2. Location: are you buying good real estate? Make sure you understand the market, demand drivers, and the potential re-use of the site in the event that your NNN tenant goes dark or does not renew their lease at the end of the term.

3. What is your terminal market value? Don't assume that the price you're paying for the NNN deal is what you'll sell it for in 5, 10, 15, or 20 years. Remember, most if not all NNN deals are valued based on the future cash flows, which means that the underlying value of the real estate may change (decline) over time as the term of the lease shortens.

Most industrial leases are net leases, meaning that the tenant is responsible for the taxes, insurance, and maintenance to the facility.

Some leases will be modified as you move into multi-tenant flex product where the tenant may share some services with other tenants, resulting in more oversight by ownership/management with a greater level of services covered by the tenant's rent.

Demand for industrial space will trail the rise and fall in GDP. As the economy grows and a rise in demand for products and materials increases, you'll see demand for industrial space increase.

One sector I like right now is distribution center and warehouse space occupied by companies like FedEx. As companies like Amazon continue to sell direct to consumer without the brick and mortar exposure that retailers have, you'll see expansion by logistics companies nationwide.

Given that you are both the landlord and the tenant in this deal, your structure should accomplish 2 things:

1. Satisfy your lender with the terms that you establish.
2. Make you comfortable with the structure such that both your business and industrial real estate investment both profit from the relationship.

In the event that you choose to complete a sale/leaseback transaction at a later date to recapitalize your company or to acquire other real estate, you can structure your lease to maximize the building's income valuation to another investor.

When you start looking for investors to put money into your deals, you're best off taking the following steps:

1. Build your target investor list and reach out to them to find out what they're looking for.
2. Make sure you have enough cash to secure and close (if you have to) on a few really good deals.
3. Call your investors and share with them the "opportunity" that you have. If it's a quality deal, they'll want to work with you.

There is much more to this story, such as SEC compliance and how you structure your equity investors, but the fundamentals are the most important. Know who your possible investors are. Find great deals. Offer them the chance to invest with you.

You can do better than this deal. The problem with these 4 unit investments, unless you're seeing a much healthier cash flow, is that it takes one capital expenditure to knock out your positive cash flow and destroy your returns.

Can you buy something larger that gives you a better benefit of scale?

These scenarios could have so many variables related to the risk and the reward that it's difficult to rate one over the other.

But....the more control you have over the deal, the less the risk and the more you should invest regardless of the asset type and location.

Dan,

Since there's no set fee that you should charge, you should tell him that you're happy he's got an opportunity to make some money and that you'd appreciate a fee for turning him onto the deal.

Ask him to tell you what he thinks is "reasonable and fair". How you feel upon hearing his offer (or non-offer) will tell you pretty quickly if you think the value you provided him was worth it or not.

If you're good at sourcing deals, next time make sure your buyer signs a non-circumvent agreement with a named fee before sharing anything with him.

Too many folks get burned on fees because they trust the other guy to take care of them after they've handed over the value before discussing a fee.

Your value declines immediately upon releasing the information, so get the agreement first, then hand over the information.

Money does funny things to relationships. I've seen it more times that I care to mention.

Good luck.

Congratulations. You're likely to have more success as a broker than a wholesaler - and you'll deal with slightly less B.S. from investors that buy wholesale deals from you.

Consider starting out in brokerage first. Once you master the basics of putting buyers and sellers together for a fee, then try wholesaling deals for larger chunks of money.

Andrew is right. I'd suggest that before you get going, secure a working agreement with your client and ask them for a retainer.

Right now you are free, uncommitted labor to them. They have nothing to lose and everything to gain. You have the opposite. Be careful how you spend your time.

Groups like this grow on trees and if they won't protect you, don't work on their behalf.