Rokslide Real Estate Investing Thread

[arrow179]

Since there is a stock trading thread I thought it would be good to start a real estate investment thread. Let’s hear about what you savvy real estate investors are doing.

I’m looking at buying a commercial property with an absolute NNN lease in place with the current tenant having 14 years remaining on a 15 year lease with rent increase every 5 years of 10%. I’m aiming for a 7% cap rate for the purchase price. The seller wants a 6.25% cap rate price. Any advice as this would be my first commercial property with this type of lease agreement?

FYI - I’ve owned and do currently own other types of real estate investments.

 

[Andrew12gauge]

I know nothing about commercial property but in a few years I’d love to buy a small Midwest farm for whitetail hunting with hopes of a farm lease to help offset the taxes


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[Duckhunterbrad]

I know nothing about commercial property but in a few years I’d love to buy a small Midwest farm for whitetail hunting with hopes of a farm lease to help offset the taxes


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A farm lease should easily offset property taxes if you don't have a large building or a home on the property.

 

[Beendare]

It's not office is it?

I've owned CRE for a few decades. I've made money and lost money. I have not done any triple net stuff. I have a couple buddies that sell these and they keep the good ones and sell the others.

Take a look at the REIT, symbol NNN's 5 year chart- they owns triple net leases for an idea of what you are getting in to. These guys are pros buying NNN leases and only buy the best deals. It's very choppy, not a good looking chart [of past performance] True they pay out most of their gains in Dividends, but you like to see it rising a little indicating improvement.



Some general comments;
1) As you probably know, Office is the worst segment- stay away. The warehouse segment is better.

2) I would think twice about getting locked into a RE deal with the best case being a 7% return when you can get that with your eyes closed in the Stock markets and be in and out in one day if needed. Example; Pfizer is currently paying a 6.4% div and it's cheap.

3) If you have to finance it, the higher rates kill your rate of return

 

[grossklw]

I haven't dabbled in NNN leases myself, do like the idea of them I just haven't found anything that really pencils out. I've owned a few different commercial buildings that have done well, but not really anything recently.

Is anyone having any serious luck getting decent deals under contract? Last year I bought nothing, the year before only a couple duplexes. I've got an off-market 8 unit I'll be buying later this year as well, but for the most part in my part of WI it's pretty slim pickings. Some of the stuff that goes under contract with the current price points floor me, they come nowhere near cash flowing.

I own around 90 units, couple STR's in there but mostly single family housing and small multi. I bought a lot in the run up before covid and have been pretty patient since then. I'm glad I have what I have now, but man it'd be tough to be just getting into it with current rates and prices. I have quite a few loans coming due in the next year that I'm not looking forward to going from low 4's to low 6's.

 

[arrow179]

It's not office is it?

I've owned CRE for a few decades. I've made money and lost money. I have not done any triple net stuff. I have a couple buddies that sell these and they keep the good ones and sell the others.

Take a look at the REIT, symbol NNN's 5 year chart- they owns triple net leases for an idea of what you are getting in to. These guys are pros buying NNN leases and only buy the best deals. It's very choppy, not a good looking chart [of past performance] True they pay out most of their gains in Dividends, but you like to see it rising a little indicating improvement.

View attachment 1074443

Some general comments;
1) As you probably know, Office is the worst segment- stay away. The warehouse segment is better.

2) I would think twice about getting locked into a RE deal with the best case being a 7% return when you can get that with your eyes closed in the Stock markets and be in and out in one day if needed. Example; Pfizer is currently paying a 6.4% div and it's cheap.

3) If you have to finance it, the higher rates kill your rate of return

This is retail not office space (ain’t doin any office spaces!). Sold a property earlier this year with a low basis so looking at doing a 1031 so I don’t get killed in taxes. This is the biggest reason for me to look at buying CRE vs investing in stock market REIT.

It’s a great location and current tenant is a franchisee for a large franchisor in this market and rapidly expanding. They do quite well from my understanding and research. The current area around it is continuing to grow and expand so that’s a major positive as well. I own another piece of real estate around the corner and everything seems to point in an upward direction especially since I’m in Florida. I figure in 10 years I will have a steady 8.5%+ rate of return and the property should appreciate nicely. I should see an IRR of at least 12-14% annually in 10 years.

Also, the property is essentially a brand new build as of last year. This seller works with the franchisor to build out properties for new franchisees then sells them.

I already have a specialty REIT investment that is paying 8% dividends and they are continuing to expand so as long as I stick with that for another 2 years I should see an additional ROI on my initial investment plus the monthly dividends.

The biggest positive is the absolute NNN lease and I really like the location. I drive by it multiple times a week and they are always super busy so I can somewhat assume they are doing well.

 

[arrow179]

I haven't dabbled in NNN leases myself, do like the idea of them I just haven't found anything that really pencils out. I've owned a few different commercial buildings that have done well, but not really anything recently.

Is anyone having any serious luck getting decent deals under contract? Last year I bought nothing, the year before only a couple duplexes. I've got an off-market 8 unit I'll be buying later this year as well, but for the most part in my part of WI it's pretty slim pickings. Some of the stuff that goes under contract with the current price points floor me, they come nowhere near cash flowing.

I own around 90 units, couple STR's in there but mostly single family housing and small multi. I bought a lot in the run up before covid and have been pretty patient since then. I'm glad I have what I have now, but man it'd be tough to be just getting into it with current rates and prices. I have quite a few loans coming due in the next year that I'm not looking forward to going from low 4's to low 6's.

I think deals are going to be completely location dependent. I’m actually also considered buying a couple single family homes as rentals as the market has really softened in the past 6 months. Lots of houses have sat on the market with price reductions. My plan is to negotiate for the absolute best deal I can as I feel like the majority of your ROI happens when you buy the property for the right price and hold it at least 5-10 years.