All Forum Posts by: Ken Thakar

Basic investment is Commercial Properties require larger down payments than 10%. Miracles can happen but I would count on at least 30% down and 50% being more likely at a bank in Houston. Your low cap rate is low so you should be able to find deals on LoopNet or REDNews. Subscribe to both and you email will be filled with offers. Vacancies can be very long in commercial properties. But tenancies can be even longer so that's why we like commercial. National tenants need an up-to-date property and they are notorious for terminating or buying themselves out of leases which can subject you to long vacancies while local tenants tend to stay longer in a substandard property. So consider upgrades and updates if the property needs them. Leases without build out will run 3-5 years so if you can buy a property with longer leases that is a positive. Best tenants can lease NNN as they understand expense inflation but others you may want to put on a shorter gross lease. Get a very good attorney as you will need one. The harsh reality is that your ten percent is not going to get you very far in commercial property so you may want to consider an office condo - that's how I started - or just run a search on LoopNet for properties you can afford and go after them.

Ken Thakar if your a newbie I would recommend against buying commercial with NNN leases. While NNN are great as an owner, there are things to consider

Below is a link to a good article about NNN leases

https://www.propertymetrics.com/blog/2015/02/19/nnn-triple-net-lease/

@Ken Thakar if the property is truly NNN meaning the owner is not responsible for any costs, your NOI is whatever annual lease payment the tenant is paying you. Most NNN properties I get sent say that right in the offering memorandum. So for instance a dollar store being offered for $1,000,000 at a 6 cap NNN is paying $60k per year.

Your COC return depends on how much of that money your borrow. If you put down $1,000,000 cash then your COC return is exactly the same as your cap rate, 6%.

What if you borrow 75% of the price for 20 years at 5% and put down $250k? Well then your monthly mortgage payment is $4950 and you get a rent payment of $5000 ($60k/12) so you cashflow $50 a month or $600/year.

Your COC return on that is $600/$250,000 or .2 %.

@Ken Thakar

Typically, speak with a commercial real estate agent and explain what you have your eyes set on.

They will explain what properties are currently available for your target area. Then they will get the flyers or brochures and review which ones you want to see.

After seeing the properties, you will narrow down your selection and the agent will provide whatever financial analysis that is needed to determine if the numbers make sense.

Commercial lending usually wants 30% to 40% down. There is the possibility of seller financing. It depends on the situation.

once you narrow down your options, the agent will submit a letter of intent that spells out what you are offering. If the seller is interested, negotiations will continue until you have a final set of numbers. Then you will move to contract and the due diligence period.

It can usually take 6 months to 12 months to search, identify, and close on a property depending on availability. If you have a decent amount of inventory in your area, it's just a matter of narrowing which ones make sense. If the inventory is tight, it can take longer.