All Forum Posts by: Jacob Franz

Hey Dominic, I am a real estate investor and broker. I own four dollar general locations, a number of multifamily properties, as well as a few single family rentals. NNN investments are great, but you need to look at a number of factors: credit of the tenant, length of lease term remaining, location of the property, and any landlord responsibilities. Have you picked what markets you are interested in pursuing as well as the type of NNN lease you are looking for: retail, office, industrial, medical, etc.? I am happy to jump on a call to discuss any specific questions you have - just shoot me a message, and we can find a time to chat. NNN investing is a great space to invest from a management perspective in my opinion!

Hey Blake, banks should still be willing to work with you if the deal makes sense. In looking at a NNN lease property, banks are going to initially focus on the length of the lease term remaining, the credit of the tenant, the location of the property, and the rental rate as compared to the market. Your ability to provide a substantive personal guarantee is going to be something they are going to want to see as well, but they will likely still play ball as long as you can get a decent downpayment in place and the deal still makes sense. As Landon mentions, the other option is to partner with an individual with a strong balance sheet. In the end, if a bank likes the lease terms and credit, they will probably work with you as long as you can put down a decent chunk of change for the downpayment.

Let me know if you have any other questions or need help as you begin tracking down potential investments!

Hey Luke, I would echo some of these other comments. With your cash on hand, you are going to need to partner with someone to get both the down payment together as well as the balance sheet that will make a bank feel comfortable lending on these assets. On a commercial deal, you are doing very well it you can get 80-20 financing. Given that these building are distressed, it is unlikely you are going to be able to find a bank willing to go that high on LTV. Banks are also going to require a personal guarantee on deals like these where there is no credit tenant in place. So again, someone with a large balance sheet is going to need to be brought in to make the deal work. The other option is to continue looking for properties that are accessible at a lower price point that you could take down yourself.

The only other comment that I would add is that hotels can take more to operate than many people realize - particularly getting a new hotel up and running. If you do decide to try to partner with someone on that deal, you should try to find someone with experience in this space. There is a lot of dumb-tax to be paid on getting a hotel up and running if you aren’t familiar with that world. It is best to be avoided if at all possible.

@John Michael Mattingly , I would recommend looking to local lenders for financing on NNN deals. A lot of the bigger banks are not interested in deals that are not very large and will not offer as favorable terms on deals below $5 million. The amount of downpayment required will also vary depending on the type of asset you are buying and the credit of the tenant. If you buy a mom-and-pop restaurant, then you are going to have to put quite a bit more down as it is a riskier investment. If you buy a credit tenant like a Dollar General or a Family Dollar, then lenders are going to be more flexible on financing terms as they are taking on less risk that the property will end up coming back to them. I just closed on a Dollar General deal with 20% down. You will need a long-term lease though and good credit. Conversely, because these deals are lower risk, they also typically have a lower cap rate, which equates to a lower rate of return. Let me know if you would like to jump on a call - I am happy to discuss in more detail.

Kevin is right on with typical financing terms for these DG deals. I just closed a deal for a well-located Dollar General in a secondary market with ten-years of term remaining. The lender did 75% LTV, 3.95% interest on a 10-year term, with a 25 year AM and personal guarantees from the purchasers - both of whom had solid personal financial statements. The more rural a property gets, the less interest there is going to be in financing it. Likewise, the shorter the lease term remaining, the harder it will be to finance.

Fast food restaurants are going to very substantially depending on the term and strength of the lease. You likely would have a hard time financing a mom-and-pop restaurant without a high LTV as there is no credit behind the lease. On the other hand, you aren't going to have any issues financing a Chipotle or Starbucks as long as there is sufficient term remaining. One of the tricky areas in the restaurant space is that many of the larger chains are franchisee owned (Taco Bell, IHOP, etc.). The financing terms will be impacted by the strength of that franchisee.

I am happy to jump on a call if you want to discuss in greater detail or if you are looking for some commercial investment options.

Hey Arshad, DaVita is a strong tenant that is unlikely to file bankruptcy. However, that doesnt mean that they will stick in your building after the lease has expired. A tenant can always find a sweeter deal down the street or decide that there is a better location elsewhere. I would pay close attention to the market lease rate for your building. For instance, if the current tenant is paying $25 PSF but the market rate for comparable properties is $15 PSF, then you are going to have a very hard time replacing that rent if your tenant leaves. Buy deals that are at or below market rent so that you can mitigate your downside risk of having a vacant building down the road. I happy to jump on a call to discuss in more detail if that would be helpful. 

As Kevin mentioned, NNN deals with strong national or regional credit and sufficient term can be financed with little trouble. I own three Dollar General locations and just closed a deal with 75-25 LTV, 25 year AM, 10 year term, and a 3.95% interest rate. The deal cashflows well and has ten-years of term. As long as you have sufficient lease term remaining, lenders are more than willing to lend on the strong retailers and QSRs out there.

I am happy to answer any questions you might have if you want to jump on a call!

Hey @Drew Hunt, I agree that there is a very limited supply of duplexes, triplexes, and fourplexes in Birmingham, but they come available every once in a while. I own a duplex in Southside that does very well (its listed in my investments on my profile page if you're interested). I have seen similar properties trade in Southside, Hoover, and even Homewood in the last year. There are a substantial number of investors looking for small multifamily properties (fourplex or below) because of the type of financing you can get on these properties so they go quickly and many never get listed on the MLS. They are out there though.

Hey Matt, I would encourage you to look in the south Birmingham, Tuscaloosa, Auburn as well as Huntsville. They are all competitive markets but deals can be found if you are patient and watch for the opportunity. I would stay away from Montgomery and some of the smaller towns around the state that are not going to have very limited or negative population growth. In the real estate game, you have to be patient waiting for the right opportunity and then move quickly when it presents itself.

Congrats @Nick Robinson! Huntsville is a solid market, and I am sure that property has appreciated substantially since you bought it. Nice work getting in on a growth market before it really got hot!