Best NNN ? What’s the ideal cap rate in Midwest restaurants?

[San Patel]

Hi, I'm a newbie to NNN. Looking for consistent cash flow on the invested cash. What's the good cap rate range? What is the current interest rate on LTV 70-75%? I'm focusing on restaurants for now.

[Jacob Dawson]

Hey San, I am a retail broker based out of the Chicago area. I specialize in multi-tenant retail, as well as STNL (Single Tenant Net Lease)/NNN. I would say you should ask yourself how safe of an investment do you want? With the QSR (quick-service restaurants) or any, you run into the problem of deciding whether you want a franchise guaranteed or a secured corporate location. What's the difference? Well, let me give you an example. Let's say we have a KFC restaurant chain operated by an operator who runs three other KFC locations in the area. If the lease is a franchise guarantee, then your lease is only backed by the other three restaurants (super risky, and you probably won't be able to get a loan for one of those deals). However, if you go for a KFC that is corporate-backed well, let's just say for the remainder of your lease, you'll be getting cash flow. With a corporate-backed lease or corporate guaranteed as we call it even if the operator goes bankrupt, the corporation that owns KFS (YUM! Brands) is responsible for backing the space with another tenant. A corporate guaranteed lease is your best bet. Additionally, a corporate guaranteed lease will have a lower cap rate.

I hope I answered your question. If you have any more questions or want to discuss this topic further, please reach out! I am happy to assist.