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Intro to NNN Investing
Professional InvestorDavid CampbellFounder of Hassle-Free Cashflow [email protected](866) 931-9149 Ext. 1
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Today’s VIPs(very important points)
• CAP = NOI / PRICE
• How to make money in commercial real estate
• Spotting a good deal
• Case study
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Disclaimer
This is NOT legal, tax or investment advice.
No agency created.
Educational only. Consult your advisor.
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Profit(Money + Time + Hassle)ROI =
We all want more profit with less invested
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Real Estate Profit Centers•Cash throw off (aka cashflow)•Equity growth from loan amortization•Tax savings from depreciation•Equity growth from appreciation (CAP Compression)
•Equity growth from rent increases (income/CAP)
•Arbitrage (CAP > Interest Rate)•Equity growth from Lease Renewal•Equity growth from increase in Tenant’s credit•Forced Equity from change of use /development
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Cash Throw Off from
Rental Income
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Equity growth from loan amortization
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Tax savings from depreciation
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Equity growth from appreciation
(CAP Rate Compression)
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CAP = NOI / Price
10 CAP = $10,000 NOI / $100,000 PRICE
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NOIPRICECAP =
10 CAP = $10,000 NOI / $100,000 PRICEAs a buyer we want a HIGH CAP as a seller we want a LOW CAP
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NOICAPPRICE =
$100,000 PRICE = $10,000 NOI / 10 CAP
As a buyer we want a HIGH CAP as a seller we want a LOW CAP
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NOICAPPRICE =
$125,000 PRICE = $10,000 NOI / 8 CAP
As a buyer we want a HIGH CAP as a seller we want a LOW CAP
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Equity growth from rent increases
(income/CAP)
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NOICAPPRICE =
$125,000 PRICE = $12,500 NOI / 10 CAP
As a seller we want more NOI
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Arbitrage
CAP Rate > Interest Rate
8% RETURN - 5% COS T of BORROWING = 3% PROFIT ON BANK’S MONEY
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Equity growth from Lease Renewal
Longer term lease = lower CAP
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Equity growth from increase in Tenant’s credit
Stronger tenant = lower CAP
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Forced Equity from improved tenancyor development
Higher NOI = Higher PRICE
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Evaluating A NNN
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Durability of Income
Lease Term
Tenant & industry strength
Property attributes
for expensesDemographicsfor releasingUpside
potential
Releasing income potential
Cost oftenant
improvements
Financingavailability
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Durability of Incomedetermines
Market CAP
“Net Leased Family Dollar”Chattanooga, TN
High Visibility Location Strong Traffic Counts Net Leased Asset - Minimal Owner Responsibility
Investment Grade Tenant Built In Rental Increases Lease Expiration - 1/31/2020
Property Information
Family Dollar - Chattanooga
Chattanooga is located in the heart of the southeast, centrally located between other major cities suchas Nashville, Huntsville, Birmingham, Atlanta, Knoxville, Ashville, Columbia, and Charlotte.
Geographic Information
Family Dollar - Chattanooga
Family Dollar - Chattanooga
Purchase Price: $678,000
Gross Rent: $56,000
Vacancy $0
Management $0
Property Taxes $0
Insurance $0
Maintenance -$1000
HOA / Misc $0
Net Operating Income $55000
CAP Rate 8.11%
Financial Information
Family Dollar - Chattanooga
Family Dollar Stock Price
Purchase Price $678,000
Down Payment 15%
Down Payment $101,700
Loan $576,300
Closing Costs $7,000
Total Cash Invested $108,700Interest Rate 4.75%
Loan Term 25 years
Monthly Payment -$3865.40
NOI $4,583.33
Cashflow $717.93
Cash Throw Off 7.9%
Financing Information
Family Dollar - Chattanooga
How can I make money with this property ?
• Rental income: creates monthly spendable cashflow
• High leverage: 85% LTV at historically low fixed rates
• Commercial Loan Amortization: tenant’s pay down mortgage
• Tax Benefits: depreciation
• Built in rent increases force equity
• CAP Rate compression
• SIMPLICITY!!!
• Resume builder / syndication opportunity
Family Dollar - Chattanooga
NN Lease Post Office“mail box money”
Leased till 1/31/17 Highest producing post office in county
Located in central business area of rural county
Leased with USPS since 1987 Built in 1987 - Build to Suit 4182 sf building on 1.11 acres 36 Parking Spaces Landlord pay roof & insurance New roof in 2009 with warranty
Property Information
The USPS employs over 574,000 workers and operates over 218,000 vehicles.
The USPS is the operator of the largest vehicle fleet in the world.
The USPS traces its roots to 1775 during the Second Continental Congress, where Benjamin Franklin was appointed the first postmaster general.
The USPS is legally obligated to serve all Americans, regardless of geography, at uniform price and quality.
Will the post office go out of business?
Purchase Price: $525000
Gross Rent: $51000
Vacancy $0
Management $0
Property Taxes $0
Insurance -$1,059
Maintenance -$300
HOA / Misc $0
Net Operating Income $49641
CAP Rate 9.46%
Financial Information
$12.21 /sf NN
Purchase Price $525000
Down Payment 25%
Down Payment $131250
Loan $393750
Closing Costs $6,000
Total Cash Invested $137,250Interest Rate 5.5%
Loan Term 25 years
Monthly Payment -$2418
NOI $4,137
Cashflow $1719
Cash Throw Off 15.0%
Financing Information
How can I make money with this property ?
• Rental income: creates monthly spendable cashflow
• Commercial Financing: 75% LTV at historically low fixed rates
• Loan Amortization: tenant’s pay down mortgage
• Tax Benefits: depreciation over 39 years
• Re-use as medical, professional office, local government, etc.
• Substantial CAP Rate compression upon renewal of lease or stability of USPS
• Syndication opportunity
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If you have interest in acquiring income property, please send an email to
and we’ll schedule a free consultation
Professional InvestorDavid CampbellFounder of Hassle-Free Cashflow [email protected](866) 931-9149 Ext. 1