3 random NNN questions

[Matthew Crane]

Hello all, I'll get right to the point with my questions:

1. When investors purchase a NNN lease and the loan has a large balloon payment in 10-20 years, where do people come up with such a large payment to payoff the remainder of the loan? Is this typical? Is it more typical to find loans without a large tail end balloon payment?

2. If I buy a NNN deal in a LLC and have a recourse loan, if things go south and the property goes dark and I'm not able to personally pay the expenses out of pocket, does/can the bank come after my personal assets (home, retirement, etc etc) or is it just limited to whatever is in the LLC? (I'm trying to protect my family and our personal assets)

3. I'm slow, but I need help understanding this one. Investors seem displeased with low CoC, low IRR, low CAP on NNN with long term leases (15-20years). If you are using leveraged debt (ex. my down payment is $1 million on a $5 million NNN with a 20 year lease), won't that 5 million dollar property be paid off in 20 years? So what if my yearly CoC is low, the tenant is paying off a $4million in equity to my $1 million). People on the board say NNN is for retirement people to "park" their money safely with low returns. But from my example above, if you invest $1 million and have a paid off $5 million property in 20 years, those seem like amazing gains to me. So, obviously I'm missing something here. Would love a simple explanation for my small brain.

If you made it this far, a big THANK YOU for reading! 

[Zach Alms]

1. It is typical to have a balloon payment 5-10 years out, at which time you will just simply refinance the project and have a new 5-10 year balloon. 

2. On a recourse loan you're most likely going to be signing a personal guarantee. Which means exactly that, you and your personal assets are guaranteeing the loan. The LLC gives you asset protection as mentioned above.

3. The CAP, CoC, and IRR are going to have a direct correlation with your yearly and monthly positive cash flow. If you plan on just parking some money in a property for 10-20 years and don't care about the cash flow then you probably don't need to worry about having a lower CAP, CoC, or IRR. Just be sure your mortgage and any other non NNN expenses are covered.