All Forum Posts by: Dan Cahill

Quote from @Ronald Rohde:

Buy now, be sure its covers the interest rate and recession risk. You need to be able to buy in all types of environments, no one has a crystal ball.

We're net buyers of industrial NNN, no better time to lock in long term debt...

Thanks for the input, I'm definitely actively looking hard, though will not rush into a bad deal. Are you always focused on industrial NNN, or you're saying at the moment you feel that the industrial space is where the value is at? I have heard a few others who think industrial is a good space to be buying at the moment...

Quote from @Benjamin Goodman:

Dan what is your investment objective and time horizon? Generally NNN increase in value when interest rates decrease and they interest rates seem to be heading the other direction but if you are planning to lock in for 10 years and sit on the cash flow you may not care about fluctuations in value...

I like the idea of compounding gains over time, and with 1031 favorable rules, would probably look to "upgrade" properties over time, and not hold one property for the long haul, at least for now as I start out.  My concern is what you echo in your post - that as interest rates rise, purchasing power decreases, liquidity dries up a bit, and values go down.  I don't want to get stuck underwater shortly after purchase as valuations catch up to rising interest rates.  I even heard potentially 75 bps interest rate hike earlier today.  

Though I am also aware a large percentage of NNN buyers are all cash and thus not sensitive to changes in interest rates.
  

Quote from @Erica Ricketts:

Quote from @Dan Cahill:

I’m looking to make my first commercial real estate purchase, seeking a single tenant triple net lease deal.

It seems that there is a lot of demand in the marketplace right now. I’m wondering if it is better to wait to see if we do enter a recession and the market cools off and prices come down.

I just recently started looking so I’m still learning a lot of the basics of the marketplace, but wondering with interest rates continuing to rise if it makes sense to try to lock down some thing now, or to be extra patient and wait and see  how the economy is six months from now.

 Hey there Dan!

There are many different reasons why people are being priced out of our current market, and also many reasons why investors should continue to purchase properties regardless of the interest rates and regardless of the possible upcoming recession. 

1) Investment properties allow a historically safe way to protect your cash through a recession. As people typically divest from the stock market or more volatile investments, they still want an investment that will ensure returns. Although home appreciation may slow down in comparison to the past couple of years, home values will continue to rise. Unlike other investments that may actually decrease in value during recessions, home values remain steady followed by a rapid increase after recessionary periods. 

2) Mortgage rates typically go down during recessions. If you find a property now, why not purchase it and then refinance after doing your rehab and initial repairs and then recoup that capital with a cash out refi once rates decrease? 

3) You have tenants/clients that pay for your investment as your investment continues to appreciate (NOTE: any professional mortgage professional will tell you that the conditions in 2008 are NOT the conditions today, therefore, you would not be upside down on your investment). In most cases, you have tenants that are paying for your investment and are steadily recouping your initial contribution.

4) Someone else is paying for your mortgage interest regardless of the rate and you get to write it off! Why not lower how much you owe while someone else pays you to do so? 

I don't think that real estate investments are fool-proof, but I definitely believe that you should not miss out on investment opportunities just because of current interest rates, especially since you'll want to refinance at some point to recoup your initial investment!

 Thanks for the thoughtful post, Erica.  I do like the idea of a refi if rates go back down, although I've been told a lot of investors only hold the STNL properties for 4 - 7 years max before flipping, since the risk elevates and the value drops as the lease term draw downs.  One lender I was speaking with even mentioned swaps as a way to hedge against potentially higher interest rates, but sounds kind of exotic.  

Quote from @Evan Polaski:

@Dan Cahill, I generally agree with Bob, and I also see a lot of reasons why the market is not cooling down, primarily construction costs will keep any existing product inflated (when compared to years ago) and when those do calm down, general inflation will have likely pushed your value anyways.

While not specifically a NNN deal, I still think about how "frothy" the 2006 single family (and commercial market) was too. Clearly there were better opportunities in the financial crisis, but anyone that owned in 2006, if they held on, likely, are in a very good position overall now.

Personally, I do not see a correction like 2008-2010 ever coming to real estate again. With NNN, the dynamics are a little different than other types of real estate, so it always depends on the use you are looking at, sales volume, technology resistance, and tenant quality. To me, admittedly having never invested in NNN, you have two primary risks: renewal and retenant, assuming you are buying a quality, credit tenant.

Thanks much for sharing your thoughts, some points I hadn't considered before.  I do get a little nervous seeing someone like Barry Wolfe say that he is imparting a sense of urgency on anyone who has been thinking of selling to sell now before the music stops, so to speak.  So I acknowledge the differing viewpoints, and will cautiously approach my first RE purchase to make sure I'm getting the best deal possible.  

Quote from @Bob Okenwa:

There's never a wrong time to buy the right deal. We were in a recession 2 years ago and people still bought property. Timing the market is going to leave you on the sidelines and disappointed. We have people on BP who have been predicting a crash since 2012 and are still waiting on that first/next property purchase...

Thanks, of course I don’t wanna be that guy. I just don’t want to buy into a frothy and very bubbly environment. I would certainly avoid a first time purchase of residential real estate right now for this reason, but I am not sure how frothy the triple net lease market is at the moment since I’m new to this space.

I’m looking to make my first commercial real estate purchase, seeking a single tenant triple net lease deal.

It seems that there is a lot of demand in the marketplace right now. I’m wondering if it is better to wait to see if we do enter a recession and the market cools off and prices come down.

I just recently started looking so I’m still learning a lot of the basics of the marketplace, but wondering with interest rates continuing to rise if it makes sense to try to lock down some thing now, or to be extra patient and wait and see  how the economy is six months from now.

Hi,

I am looking to get into commercial real estate as more of a passive investment (as passive as can be in this biz), as I currently only have stock holdings and want to diversify and build a steady stream of income/equity.  

I'm located in the northeast, and have mostly been looking at properties within a 30 minutes drive.  However, I don't want to limit myself to just opportunities nearby, as I see all kinds of QSRs and dollar stores, etc. all over the country that could fit my budget.  

At this point, just looking for some general feedback/thoughts on whether I should approach this path of looking out of state.  I'm looking to put maximum $300 - $500K down, and probably closer to the 25% down payment amount.  I know lenders probably want to see some liquid reserves, so trying to keep closer to the $300K range or less if possible.  

Ideally would find a NNN or absolute NNN lease with a Starbucks/Chipotle/McD's/etc. blue-chip type tenant in a relatively new building. Cap rate I think lowest I would want to see is 4% on a 20+ year term with a blue-chip, with higher rate if a step below type of tenant and/or shorter term.

Should I be working with a NNN specialty kind of broker? And specialty lender? I look forward to combing through more of the wonderful threads already on this forum, but wanted to get thoughts based on what the current market is offering as well.

Thanks!