All Forum Posts by: Kevin Sellers

Matthew - I arranged financing for five Dollar General properties last year with another closing next month. Best financing terms are for DGs are for properties in locations where there is at least 5-7,000 population in the 5-mile radius and more importantly, other national retailers in the immediate area. For those locations and assuming at least 9-10 years remaining lease term, 70% LTC financing is available with excellent loan terms. For the rural locations and 10+ years remaining lease term, loan terms are still good but loan proceeds are limited to 65% LTC/LTV. For fast food retail, max loan proceeds are generally 65% LTC/LTV. Also for QSRs, lenders want to see national brand name corporate store or franchisee that operates 40+ units. You are correct that lenders typically want to see > 10% of the loan amount in liquidity (excluding retirement accounts) and net worth > 100% of the loan amount.

Yes, required third party reports are appraisal, Phase I ESA and ALTA survey.  Appraiser relies most heavily on the income approach to value the investment property.  I have had zero issues with appraised values - all are coming in at or above the sales price.

The loan for the Walgreens that we closed yesterday was 3.87% fixed for 10 years on 25-year amortization, declining pre-payment penalty, no lender origination fee and partial recourse. Other WAGs closed this year were 3.89% to 3.91% interest rates fixed for 10 years on 25-30 year amortization schedules. Advance rates can go as high as 70% LTC/LTV. Loan terms are virtually the same for properties tenanted by CVS, DaVita, Fresenius, Starbucks, Tractor Supply, O'Reilly Auto, Advance Auto and AutoZone. Same loan terms with slightly higher interest rate (10-15 basis points) for Dollar General, Family Dollar and Dollar Tree as long as there are other national tenants in the immediate area of the property location. For dollar stores located in rural/remote areas, max advance rate is 65% with a 0.375% lender origination fee. Properties must have at least 8 years remaining lease term and preferably 10+ with best rates at 13+ years.

Steve - I am a commercial mortgage broker specializing in single tenant properties nationwide.  I arranged financing for three Walgreens properties this year and a fourth is closing today.  Would be happy to discuss.  Thank you!

Sandra - I agree with Joseph's comments and recommend you work with a mortgage broker who specializes in financing for single tenant properties.  A good STNL mortgage broker has relationships with national single tenant lenders to which an individual buyer/borrower does not have access.  Often, the lenders that a mortgage broker will use do not charge an origination fee but you would likely pay an origination fee if you approach local banks on your own.  Local banks loan terms are generally not as favorable as the national single tenant lenders.  The mortgage broker also closes the loan for you, coordinating all the parties and processes to ensure the loan is delivered on time and without any delays or surprises.  The mortgage broker is part of your team and represents you, not the lender.  

Emery - sounds like the 4-unit CVS portfolio is being offered with an assumable loan.  In some cases, the seller will require the buyer to assume the existing loan.  In other cases, assumption is at the option of the buyer.  Depending upon the terms of the existing loan, it may or may not be advantageous to assume the loan.  CVS is an excellent tenant but ability to arrange a new loan (if needed) will heavily depend upon the remaining lease term of each property and if there are rent holidays on any of them.  A rent holiday will make financing extremely difficult unless in a low leverage structure with rapid amortization of the loan principal.  The high cap rate of 6.47% gives a clue that the lease terms may be relatively short.  

What is the interest rate on the existing loan that presumably can be assumed?

I have a lender that has funded Zips Car Wash deals at max 65% LTC with 5, 7 or 10-year fixed rates and 25-year amortization schedule.

Raj - Properties with Starbucks or other investment grade tenants with long term leases are very much favored by lenders.  For a Starbucks in a good location with strong demographics and 8+ years remaining lease term, you could expect up to 70% financing with interest rate around 4.00% fixed for 8-10 years and 25-year amortization schedule.

Scott - Buying a replacement property with 24% down payment might be tough. If you bought a single tenant property with nearly 50% down, financing options would be plentiful with attractive terms. Much less management stress with NNN properties compared to multifamily.

Your parameters are very challenging.  Have you thought about joining with another investor who can invest about the same amount of cash?  Then you could double the purchase price of your target property range.