NN Retail Just closed for $580,000

[John McKee]

Here is a deal deep dive that I wanted to share:

The property is a a former bank building that is now a Vet office.  Cap rate is about a 7%.  The deal was financed with $280K in cash and the rest using a home equity line of credit.

Why do I like the deal?  It's a national tenant on a busy road with a building that already has a drive thru.  Should be easy to rent and you can't build a building like this for the price tag.  I like that it's passive!

Is there any value add?  Not much, but that's okay as I am a cash flow investor.  Rent increases are 2.5% a year.  I suspect if the tenant leaves after 8 years I could bump the rents by 25%

Why did you use all Cash?  I wanted to let the seller know I was a serious buyer, and they wanted to close fast.  My bankers were getting a little skittish with the rise in rates and my heloc was a lower rate anyway. There was some competition for the property as well.

What are the negatives?  I am responsible for the HVAC and Roof.  However the roof is in good condition and the HVAC is new.

So how much do you make?  Net is $2,200 a month

So what is the plan for this property?  Now that the deal is secured I have some options to consider. 1) Do a cash out refi and reinvest the money.  I will most likely pay off the equity line with this money in the interim until I find another property. 2) Enjoy the cash flow and sit tight.  3) Syndicate the deal as a form of cashing out.

Who is the hero in the deal? My HELOC is the hero. Having access to capital quickly when I need it has served me well.

What was the hardest part?  Proving to the insurance company the age of the roof.  I had to hire someone to inspect the roof.

What was a surprise?  The Broker is interested in doing a deal with me in the future.  You never know who you will meet that can change the direction of your life.

Hope this gives you perspective on my world.  Keep on Investing!

[Joel Owens]

Great. I will share a recent deal I did also.  Dairy Queen 8 years old. New build with new equipment. Bought 375,000 cash. Single unit franchisee where bank financed business and building. Franchisee went bust during Corona. Bank wanted off the books before years end. Multiple offers but my decades of experience and paying cash won the deal because bank as the seller wanted year end surety of close above all else.

There is already another 100 unit DQ operator in the state that has expressed interest in leasing the space. It's newest prototype, all equipment there. Just sign the lease, stock it, and put employees in and off you go. It's in front as outparcel to a big grocery anchor.

These are harder to find but might 4X my money once stabilized. Will refi eventually and pull out original cash invested plus more at about 50% LTV and go buy a few more. Have other cash to keep buying more now. You do not win all the deals but I just want the fat ones.