Using one Triple Net property to finance another

[Patrick Sears]

Hello,

I've recently become interested in the NNN space due to its inherent scalability, but was wondering how someone can buy multiple properties before running out of sown payment money? Can you use the equity build-up due to loan pay-down as collateral for another NNN deal? Also interested in zero cash flow deals, since they apparently require less down pmt/higher leverage/quicker payoff in exchange for the immediate cash flow that could be saved up for another down payment.

Also, if anyone has experience with NNN, what kind of down pmts are banks typically looking for (both standard and ZCF deals)? I listened to both the Matt Onofrio and Joel Owens podcasts, and they seem to have very different ideas on what are realistic bank-required down payments in this space...

Thoughts?

[Joel Owens]

Patrick,

2 main types of retail properties. Value add and then investment grade credit jewelry box.

So my clients buy the properties putting 30 to 35% down for NNN and get maybe 6 to 7% cash on cash going in and then with mortgage paydown hit 10% or more annual IRR. This is more for properties in the 5 million and under space. You get into larger STNL and cap rate can rise some.

If an investor already has millions or makes 500k to 1 million a year as a doctor etc. they do not need massive cash flow. If inflation runs 1 to 3% annually and the total return passively outpaces inflation by a factor of 3 to 4 times with an investment grade tenant then the buyer does not need to invest in riskier stuff with supposedly higher returns.

On the flip side I am a sponsor on retail value add deals where investors invest with me passively but need to be accredited. These are heavy stabilization smaller type deals with usually good upside.

Benefit of retail value add is when lease is created the new value is usually obtained all at once and can exit in a few years time with STNL. That versus apartment buildings where they might have a 10 year outlook to double equity.

Each investor is different. I have talked to thousands of investors over the years. STNL is a more passive investment and not active. Active you are working for yield. Different Universe.