Triple net franchise properties

[John Boby]

What is the best State and city to buy Triple net franchise properties for investment. Since California the cap rates are too low and the prices are really high. Special the minimum wage is going up.

[Joel Owens]

Hi John,

Are you paying cash or going to finance a portion? Is the money ready to go or do you need to do a 1031 exchange?

Are you ready to add money to the 1031 exchange proceeds for the right property or just use the 1031 proceeds only?

For single tenant net lease there is NNN, NN, ground lease, and leasehold.

For restaurant I use 5 levels for guarantor on the lease.

Taco Bell as an example is owned by Yum brands.

1.Highest guarantee parent corp. Yum brands guaranteeing thousands of locations for the primary term of the lease.

2. Subsidiary of parent corporation - Yum brands guarantees with say 400 stores in 6 states versus nationwide for the lease.

3. Large franchisee with over a hundred stores and a long track record of success in their system over decades.

4. Small franchisee with just a few stores

5. Mom and pop not even a Taco Bell concept just Joe's Taco's

Some states are no income tax.

Those states mentioned have some good drivers but also Florida, Georgia, and many others in warm belt states are doing well in many areas. The value is tied to the dirt and the lease length and terms. Raising minimum wage many QSR fast food are starting to implement electronic kiosks to reduce workers needed to fill orders.

What price range you have to spend makes a difference as well. 1 to 2 million mainly fast food available. You go up into mid 2's to 5 million you get into more of the sit down restaurants.

I help clients nationwide. Different states are compressing for cap rate at various points right now. It's all about the return you are wanting and the capital you want to outlay.