All Forum Posts by: Joel Owens

DST's have an EVENT HORIZON mandate where they have to dispose of a property by a certain timeline.

So one DST overpaid and I am offering 1.5 million dollars less with cash purchase to buy it from them.

That is why I do not like properties with debt on them or these DST's where they have to time the exit. Some of my clients bought at 5.25 cap rates when debt was at 3.5 and they did fixed for 10 years with 30 year amortizations and had a healthy amount down to start. So by the time the loan comes due they can just pay off the tiny remaining balance and do not have to sell.

Debt can be good in certain situations if you use it properly but if abused debt with commercial properties you could lose half the investment having to sell in a non optimal time in the market.  

Have Thursday 3 Eastern time. You can inbox me here or reach out on my website and fill out the contact form.

Depends on your goals with syndicators. For my syndications I raise all cash. I don't want to be a slave to the debt markets. 

When you pay cash you can hold the cards more as to when to exit. Pay special attention to syndicators that use DEBT and how they STRUCTURE that debt. Interest only loans, floating debt, short term fixed debt, etc. are all time bombs ready to go off at any second.

Most of my properties purchased with NNN are sub 10 million. I have a huge buyer pool for buyers looking for stabilized assets for passive wealth on the exit. Take that versus multifamily or other projects where syndicators like to use massive LTV debt so they have to raise as little as possible from accredited LP's. Their pro-forma's are often crap and few materialize like they say.

If you have a 50 million multifamily when you get upside and sell for 80 million eventually you better time the debt cycle and asset class cycle just right or you will get your as$ kicked hard which is what is happening to lots of syndicators that do not have decades of investing experience.

A property should stand on it's own without debt and still make sense. If a syndicator has to use exotic debt to make a deal look appealing run the other way fast.  Those big properties on exit have a very small pool of buyers that also use heavy debt and are sensitive to interest rates.

Good luck  

Zachary it never ceases to amaze me how everyone post all these strategies but nobody asks about YOUR LIFE and investment goals.

You can be in the high growing wealth phase, medium growth, and wealth preservation phases for some or all of your portfolio. I call it active to passive wealth conversion.

To some investors a 5% return is amazing and to other they want 12%. Along with that can come more risk and uncertainty with the investment.

I typically know within 60 seconds on the phone if they are a fit for NNN or not. I tell them my thoughts if they are not a fit what they might want to look into.

Good luck   

Currently I do about a dozen buyer broker deals a year where I help them buy NNN single tenant properties.

On the syndication side I buy value add single tenant properties blend and extend with lower years remaining in primary term and also dark buildings NNN still paying rent. We buy them all cash with a separate LLC for each one. I am buying about 1 a month trying to ramp up to 2 a month.

The floor for purchasing is a 9 cap. The 100 points is needed for my GP fee and calculating 10% of the annual NOI to watch over the property. Charging 10% of NOI is easier for accounting than recalibrating complex waterfalls every time the NOI grows. We typically 8 pref to start. Most LP's accredited investors on value add in any asset class want 8 pref to start minimum.

Between the broker deals, syndication fees, and back end equity growth the projection is about 3 to 5 million a year net worth trajectory and growing. I put in 30hrs a week and that is it. I care about time and making incredible memories with my family and friends. Making money is great but not the end all to be all above everything. People and experiences are the true treasures of the world.   

Princella could have saved you a bunch of time. 20% down on NNN doesn't exist that is a pipe dream.

When interest rates were 3.5% many years ago cap rates were about 5%. Even then the best you get in with is about 30% down for long term lease. Some doctors worth 20 million making 1 million a year with a local bank they hold deposits with I have seen 20 to 25% down but they personal guarantee and cross collateralize all assets and give 20 year amortization schedule instead of 25 or 30 to have faster loan paydown. These types of buyers do not need the money they are buying for passive returns and tax purposes. 

Today for interest rates 5.9 to about 6.4% for NNN you need about 40 to 45% down because of DSCR ratios because cap rate is low 6's to 7 cap at best. Low sub 3 million range most cash buyers trying to beat the bank at 4% so buy 6.0 caps all day long.

Most Dollar Generals are crap. They are credit grade tenant but sheet metal sides and back middle of nowhere. The good ones are upgraded construction in strong suburban to urban core areas or Dollar Trees that have taken over old Walgreens locations on hard corners with upgraded construction. That's maybe 10% of them out there. Rest are usually junk.

TIC is ( tenants in common ). You have a TIC and then a DST ( Delware Statutory Trust ).

The DST's were created from a bunch of TIC failures within the last few decades.

TIC's can work IF there are a smaller number of investors. When you get into large TIC's with lots of investors that use debt it can get complicated. Unlike a DST the TIC members have voting rights. If there ever is a decision to be made with a property you can have infighting with capital call injections, placing debt for loan or refi, when to sell, etc. During this time the assets value can plummet because of stagnation between the investors.

The DST one person controls the ship.

1031 DST and TIC shares are easy to get into but very hard to get out of if you ever need to sell.

It can work sometimes if the proceeds are small like 500,000. With 500,000 you can't buy own direct for yourself really anything good in NNN. So you could own with 500,000 a fraction of a Wal-mart in good location that you could not afford with 500k proceeds to own 100% yourself.

What you give up is control. I mention to people if your net worth is say 3 million and you are putting over 1 million into a DST or TIC that can be a bad move as you are giving up control with a high percentage of the money you have. Yes you have voting rights typically with TIC but so do the other investors usually so the control is not there.

If the TIC is simply a small percentage of net worth like 500k in when net worth 10 million and make 1 million a year and the person just wants to get passive then they might be a fit.

DST's are heavily laden with front fees as high as 12% sometimes. The DST buys down the interest rate front loading mortgage origination fees.

Sometimes people can buy a retail condo for interest in a shopping center in a good area for the 1 million dollar range. Again in that situation the NNN investor is not typically the controlling declarant (majority owner) of the association so you lose some control over your asset.

There are no 100% answers just varying answers depending on the individual investors risk tolerance and desire for control. I hope your works out well for you. I have seen many TIC's implode over the decades. They can work sometimes but the operators of the TIC's really have to know what they are doing and pick the right properties with the right group of TIC investors so the synergy works properly for a chance at success.

Go to my website. I wrote a lengthy book on NNN properties. I have to update it for todays interest rates but have been too busy.

It's free to download.

As a broker in NNN 21 years and owner of my company what I would say is DON'T RISK your buyers hard earned dollars with the inexperience of not knowing NNN.

Residential brokers and agents see commercial and think whopper of a check compared to selling houses.

You need to refer this off to someone that has experience and not wing it with your buyers hard earned cash. They could lose some or all of their investment not buying right with NNN. Lots of trash out there. Experience and wisdom teaches the winner NNN properties from the duds. You can't get that reading a book you have to live it.

I am a believer you should stick to one thing and be a world class expert at it instead of knowing a little of everything. That creates lots of liability often with poor results. 

I have been in NNN for about 21 years. I am a principal buyers broker meaning I own my own company.

I also am an investor and own NNN properties around the country.

Need to look at home many properties you are trying to 1031 exchange into NNN and if they will all sell at the same time.

Next look at your expected proceeds. 2 million NNN is like a 200k house it is starter range for good suburban area for dirt and tenant.

Without knowing your expected proceeds, cash on cash returns expected, and price point can't comment further.