Inherited Commercial Property - NNN or hold and Lease ?

[David Johnson]

My family currently owns a vacant commercial property ( 2,400 sqft) in Massachusetts we can divide into 2 spaces for lease. We ran it as a bicycle shop for 45 years. The location is literally the center of a long-standing plaza (Shaw's grocery, Marshalls clothing, restaurants etc.) owned by a major commercial real estate developer/investor. I want to keep the property and lease, but one family member wants to NNN 1031 Exchange with a national commercial RE company, assuming a $500K loan, and find a new property . . . "triple guaranteed" with "national franchise". In the end, our current location has been our guarantee . . paid off . . no debt load, no agent %, no out-of-state ownership or extra costs . . . just find tenants. I can't justify selling for a relatively short-term guarantee while assuming major debt. Am I wrong ?

[Joel Owens]

The post is unclear. If you are exchanging 500k for NNN basically with a loan looking at a Dollar Store 2 million and below in price for around a 7 cap because debt is about 5.15 fixed.

The other national tenants sub 2 million price NNN are typically 5 plus cap rate range so with debt of 5 percent have to basically almost be an all cash buyer these days.

If your existing space is in demand you could use what they call a (fee developer). They help land tenants, reconstruct the building, handle contractors,etc. So for a fee might be 100k or more they help you through the process. You need to check in your area what is typical.

You could also tear down the existing building and then do a ground lease where  a national tenants builds on it. I would have to see the size of your parcel and pics to comment further.