How about a Triple Net Single Family "Rental" Investment

[Buddy Holmes]

I am new to BP and listening to the podcast from the very beginning. I just finished with show 004 with @Frank Gallinelli. His discussion of Triple Net commercial property came from a different perspective than my earlier understanding of CVS, Walgreens, etc. I suddenly realized that a good deal my RE Broker came to me last summer with, is in fact a Triple Net SFR Investment! Has anyone else had one of these? The back ground is that my RE Broker host a local RE radio show. A couple came to him with their problem of needing to move out of their home which was involved with a short sale. They had found another property with some acreage (they had horses) and asked him how can they buy it.

He put them in touch with his (now mine as well) mortgage broker to discuss. Both these RE and Mortgage Brokers are "out side the box" thinkers. The Mortgage Broker toldd them that they were financially set to buy the new property but they needed to wait three years for their credit to clear for a loan. But once they were clear they could get a great deal on Department of Agriculture Loan with as little as 3.5% down on this property. With the family's approval, the two brokers got together and came up with what is in fact a NNN Investment deal on a 5 acre horse farm and home.

The deal was offered to me, and after some back and forth negotiations once the first sales price set,

was the following:

I would buy the property on a 20% DP conventional mortgage (My RE and $ Brokers both win)

The future Owners place a nearly 20% cash deposit on a signed Sales Agreement to buy the property in 36-48 months for a price that allow some modest appreciation and escalates abit after the 36th month for incentive to close.

The family signs an Occupancy Contract (not a lease or rental agreement) which sets the monthly fee (rent) to be $150 over the cost of Mortgage, Taxes and Insurance. In addition the contract specifies that they are responsible for all maintenance and repairs and compliance with local regulations.  They are able to add improvements (it needed a horse corral (yard) with fence, etc as long as they did not involve anything with might lower property value.   Nearly through the first year and the deal is working like clock work.  

I see this a Win-Win for all involved. The family got a beautiful brick completely new rehab (roof, HVAC, flooring, cabinets, baths, kitchen, appliances.. as well as their horse farm in a quiet setting. I am getting a good CAP and will get a good ROI in another couple of years. My two brokers got their fees.