Hi guys,

I have been investigating a couple triple net leased properties. Can you guys give me some advice on how to get the lending I may need. I have been interested in a Sonic in Clovis Ca. built in 2004 asking price is $2.4 million. I have $200k of my own money to put down possibly $250k but that might be pushing it. The Sonic is on a 20 year lease. The NOI is $150k which increase 15% every 5 years. How do I go about getting financing for this deal. I have an excellent credit record, but am not sure what type of loan or rates are avaliable. Would need to borrow 2.2 million on an interest only commercial loan? What kind of interest rates would I be looking at? If anyone can help me to find financing it would be greatly appreciated.

Also as a side note, I have two other single residental properties that I rent out, but they have been headaches with the tenants. How come you don't hear much about NNN leases. A broker friend of mine let me know that triple net leases are out there and they are relatively headache free, and still provide great income. So is it just me or is it hard to find books on this subject or anyone that is knowledgable in this area?

Thoughts?

Thanks,

Michael

If the Sonic location is run by the parent company of Sonic or the Sonic corp is guaranteeing the lease and the Sonic corp is considered investment grade (a debt rating of BBB or better) then you can finance up to 95% with rates in the high fives with both the term and the amortization matching the years remaining on the NNN lease.

If the lease is with a franchisee, then expect to put 20%+ down unless the seller is going to carry the entire financing or hold a second mortgage. In the event that the seller will hold a second mortgage, you will still need 10% from your own funds plus closing costs. Rates will be in the low to mid 6's with terms out to 25 years.

Residential properties are very rarely done as NNN leases. If you think you have headaches now with the tenants, wait until something goes wrong with the property and you have to tell them it is their responsibility to fix it and pay for it. The other side of it is that even if they do fix it, they most likely are not going to do a good job or want to pay to do it right.

Rather than a NNN lease, owners who want to rid themselves of the headache of dealing with renters generally offer the property on a a land contract or sell it holding a note.

I have access to lenders that will fund NNN investments as high as 100% LTV,

The numbers on the Sonic might just work out. The listing package on these transactions usually is good enough for lenders to figure out financing terms.

While the numbers are tight some lenders might factor in rent increases in their cash flow calculations. Also, to make the deal work, they might offer interest only for a couple years to help with the cash flow.

These properties don't sit on the market too long so you need to get going soon.