Getting into NNN investing questions

[Chui Chan]

Looking for insights and opinions on my personal situation. I am exploring the transition into NNN investing because I'm tired of residential tenants. If someone's heat or toilet is broken I would rather that not be my problem. I thought more units means more money but it also means more issues and more units is not the answer. I'm thinking commerical, good tenant, higher dollar cost but overall fewer units.

I'm looking at CVS and Walgreens with NNN leases. I am a pharmacist and I believe these to be stable companies even though cap rates might be lower to reflect that.

I would be looking for leases with over 10 years remaining since I'm not eager to value add and I would rather put off the potential for having to deal with a possible vacancy until I have more experience in the field.

I'm in New York state and I would be looking to buy in NY. I know with a NNN lease it shouldn't matter since I have no landlord responsibilities and I could be looking nationally, but I like the idea of being able to drive to these locations and check them out for due diligence and at least having it in the same state if I do have to deal with it going dark or have a vacancy.

I'm looking to buy the lowest cost property that's reasonable. Meaning I'm not looking for the cheapest listing overall, but maybe the cheapest that still has over 10 years on the lease. With a high quality tenant such as CVS or Walgreens I'm hoping the down payment would be 20%. With this being my first foray into the market I'm just looking for a good first transaction investing the least amount possible. My returns are going to be greater elsewhere but active management and volatility of the stock market both suck. If all goes well then maybe I either pay down the loan come refinance time for more return, or buy more NNN properties. If NNN is great then sell all residential rentals and accept lower overall returns in exchange for not having to deal with people and issues.

With a $2.5 million listing at 20% down we would be talking 500k down.  I currently have about 800k liquid cash and another $2 million in residential rentals.  

My questions:

1. How does financing work?  Is 20% down reasonable for these high quality tenants?  With residential it was easy, go to local bank and they just finance the deal with 25% down.  I've been searching online to find commercial lenders or specialized lenders for CVS or Walgreens but it seems a lot harder to sort these companies out and terms seem to be a lot more opaque.  Are national lenders better than local lenders for this marketplace, or are local lenders not even a thing?

2. How do commisions work in commercial real estate?  I'm also a licensed real estate broker and for residential properties a trick I would use is to represent myself and collect a commision on the transaction.  So on a 125k duplex my down payment might be 31k, but I would get a 3% commission on the 125k and get almost 4k back.  Is that also possible with a commercial transaction?  Do commercial brokers share commisions the same way?  3% on a $2.5 mil transaction is 75k, which isn't nothing.  Especially compared to a 500k down payment.  But I also know that commissions are generally lower for the commercial sector.

3. Any major "gotchas" in NNN that can blindside a new investor? In my research one potential concern would be a "rent holiday." A lease can have the commercial tenant just not pay rent in the last 3 years of their lease. This sounds crazy in my opinion and is not a thing for residential tenants. Is the owner supposed to charge more in the beginning and just hopefully have it made up for in the overall picture? Seems like it would wreak havoc for stable, consistent cash flow and it's like dropping a bomb on the new owner if it's going to happen on their watch.

Thanks to everyone in advance for their willingness to opine on my life.