Commercial Retail - Big box store Out of State

[Rick R.]

Hello Investors

I need some advice on this out of state Commercial purchase. We own small Commercial office spaces and are looking into purchasing a Retail building with 2 tenants with one of them being a big box corporate tenant which sells furniture and another a local restaurant. Big box tenant occupies 80% space and has been at this location for about 4+ years. This is managed by a Property management company

Purchase price is $7.3mil at 7.15% cap, NOI = 522K, NNN leases and both have 5+ years lease on their primary lease term with 3x 5-year options to renew. We will be financing this with 25% to 30% down at about 7% interest rate. With the current rents it works about about 7%-8% Cash on cash returns with Principal loan payment + cash flow. Our cash flow will increase if interest rates go down in next few years.

1) Any input on this deal? Our biggest concern is what happens if the Big box tenant goes out of business. It can be challenge to replace them

2) What gotchas to look out in the Lease agreements?

3) Any creative loan options to go for a lower interest rate? 

Appreciate your advice