What are typical financing terms when purchasing a single tenant building?

[Andrew Lerner]

What are typical financing terms when purchasing a single tenant building?

[Joel Owens]

There aren't.

Depends on credit of tenant, strength of borrower, primary years guaranteed left on the lease, strength of location for median income, number of houses, population levels in 5 mile radius, area political philosophies, level of crime.

About 20 years in the NNN space as a principal broker and investor.

Right now about the best rate is mid 5's with 25 year amortization for investment grade credit tenant and strong location with about 40% down.

Lots of my clients are waiting for 1031 money volume to reduce over next few months and interest rates to stabilize. That can make sub 4 million price range go from current 50 basis point spread between debt and cap rate average to 100 to 150 spread which is what buyers like to do deals.

Sure there are higher cap rates for junk tenants that are 6.5 cap but interest rate not 5.5 it's 6.3. The name of the game is the spread. 1031 buyers looking at millions in tax penalties for failed exchanges can put 50% down for 3 to 4% cash on cash return before mortgage paydown and then get little to no-prepay penalty on the loan and refi in a few years when rates drop some. By then likely rental increases and lower interest rate increase the 50 basis point spread to 100 to 150 and they defer the taxes.

Cash buyer or buyer some down cash using debt non-1031 doesn't like 3% cash on cash return when bank paying 4.5 to 5% to stay liquid month to month for return. They would rather wait for higher cap rate to deploy the cash. I think around August it will get crazy busy as fed will be scared to raise rates anymore and seller will have ( marked to market ) selling for higher cap rates and the sellers testing the waters hoping for a 1031 buyer to overpay will be long gone.