All Forum Posts by: Alex Skeg
Alex Skeg has started 2 posts and replied 8 times.
Post: What do I need to know before diving into NNN lease investing
- Posts 8
- Votes 3
Quote from @Brock Mogensen:
Leasings/leases is the biggest factor in the NNN game. Use conservative lease up periods, TI's, and realistic rents in your underwriting. Also Cap Ex like roof and parking lots can be a deal killer, make sure to do proper inspections on that. I love the NNN space, especially industrial. But need to be very keen on being able to fill spaces if/when they go vacant.
Industrial/single tenant isn't an asset class that I plan to touch. I believe its a great asset but I can't go months without any sort of cash flow in the event of a vacancy
Post: What do I need to know before diving into NNN lease investing
- Posts 8
- Votes 3
Quote from @Paul De Luca:
On the spectrum, NNN leased properties are considered less management intensive but as @Zach Alms pointed out you still need to make sure you're meeting the lease obligations.
I worked in property management to help manage portfolios of industrial buildings with NNN leases and planning/coordinating large capex projects can be time consuming. You as the owner would need to approve those projects and work with your property manager to address other issues as needed.
Those Capex projects are paid for by the landlord, correct? They can't be passed on as CAM expenses?
Post: What do I need to know before diving into NNN lease investing
- Posts 8
- Votes 3
Quote from @John McKee:
The leases are the key to dive into because they can all be different! Just make sure there is enough of a CAM budget to cover all common area expenses. Make sure you drill the existing owner on warranties on the roof, insurance costs, and the age and status of all common are expenses. You can generally self manage these if it's small enough in size. You can PM me if you want a full analysis on your project. Welcome to the NNN lifestyle!
I'll definitely take you up on that, thanks!
Post: What do I need to know before diving into NNN lease investing
- Posts 8
- Votes 3
Quote from @Joel Owens:
Alex people that move from multifamily into multi-tenant are primed to be ripped off by a seller or listing brokerage. They will try to pass stuff onto you that they would not stand a chance selling to someone like me or my clients.
With a retail center there are literally hundreds of items to watch out for or more in a deal. It's way more complex than a single tenant deal with lots of variables. Often people get sucked in looking at a high cap rate compared to what multifamily is going for. The lower credit to no credit the tenant is the more you have to vet them with underwriting as a non-pay, slow pay, or going dark risk.
Post: What do I need to know before diving into NNN lease investing
- Posts 8
- Votes 3
Quote from @Zach Alms:
Alex,
1. OMs are not to be relied on, you'll want to do your own DD and confirm it is accurate.
2. Hidden expenses you should look out for are roof, parking lot/sidewalk and possibly HVAC units. Sometimes these items are covered in a NNN lease but normally full replacement is not covered.
3. Just because it is NNN doesn't mean it will be completely hands off, unless you are hiring a property management company. You'll still need to set up and pay all vendor and service contractors, common area utilities, take calls or emails from tenants on any maintenance issues.. it's definitely a lot less work than being a hands on apartment owner/manager but I just don't want you to think that NNN is completely hands off.
Thanks Zach, I was looking forward to banking the 3-5% management fee in the CAM expenses and managing myself.
Everything that you mention should be common area stuff for the vendors, correct? The landlord doesn't coordinate to fix the electrical outlet in a NNN lease as far as I'm aware of. Correct me if I'm wrong. I know it depends on the leases.
Post: What do I need to know before diving into NNN lease investing
- Posts 8
- Votes 3
Coming from owning only multifamily properties, what do I need to know or where can I find info on what goes into owning/operating a building with NNN leases?
I am looking for multi-tenant commercial retail/shopping center with NNN leases. Are offering memorandums usually reliable? In multifamily they can be highly inaccurate but I don't see where they can be wrong in commercial with NNN leases, other than vacancy.
I know going through the existing leases, inspecting deferred maintenance, terms of what the landlord is responsible for, and underwriting the existing tenant's business' ability to repay are all important.
Are there any hidden expenses that can play into owning NNN leases? For instance, in multifamily repair expenses and vacancy/turnover can come up easily and will kill cash flow. These are some things that came up for me and made me want to jump ship to NNN leases.
What are some situations where NNN investors can get caught up and lose cash flow, such as deferred maintenance. I know an unforeseen vacancy can be a huge issue.
Or am I overthinking this and is it truly hands off, I can count on the rent each month as long as its occupied, and tenants are responsible for CAM and repairs.
Do I just need to manage the property management CAM, accounting for the income and NNN reconciliation at the end of the year?
Sorry if this is unclear, it just seems like theres a lack of information out there on commercial. If anyone could point me in the right direction I would really appreciate it.
Post: Commercial Retail - Big box store Out of State
- Posts 8
- Votes 3
In Retail Commercial why is there a need for property management if the leases are NNN?
Post: Is a Cash out refinance a good idea in my situation?
- Posts 8
- Votes 3
I was recently passed down a property that has a return on equity of around 10%. The property is paid off in full. The logical thing to do should be to refinance the property and use the money for other investments.
The problem I'm having is finding another investment that cash flows me the same amount every month.
For example: this property cash flows me $4k monthly. If I refinance and pull a loan of $800,000, the debt service will eat away my cash flow from the current property and I can't find another property that will combine with the current property to cash flow $4k monthly.
Basically, if I refinance I will be cash flow negative from my current net income on the property.
Is it better not to refinance in my scenario?