An Introduction To NNN Investing
Retail Categories
The Investment
Types of Sellers
The Buying Process
Market Analysis
Highest and Best Use Explained
Location and Site Analysis
Financial Feasibility
Industry Trends
Due Diligence
Financing
Low Risks of Default
Sample Lease Agreement
Sample Letter of Intent
Sample Commercial Inspection Report
The Buying Process
Once you have resolved your investment goals to include ownership of a retail net leased property, the process will follow the pattern below.
1. Review of available properties with the desired tenant.
2. Deliver a “Letter of Intent” (LOI) to the seller who will accept or reject it. This should take 1-5 days.
3. The seller’s attorney will draft the purchase agreement and send it to the buyer’s attorney. This may take a week to 10 days.
4. The parties will negotiate the final terms of the purchase agreement. This may take a week to 10 days.
5. Once both parties sign the final purchase agreement, the due diligence period will begin.
6. The due diligence period will usually last 15-45 days.
7. Closing will occur approximately 7-14 days following the end of the due diligence period or an additional 30-60 days if financing is used.
Estoppel Certificate
One of the most important documents to be reviewed prior to closing is a written estoppel, which is a representation from the tenant. This certificate identifies the current lease, including any modifications, and amendments. It also confirms that there are no disputes between the tenant and owner and no unfulfilled landlord obligations.
If there are any problems or defaults between the tenant and the landlord, the estoppel certificate will point them out. It is a way to verify that the seller’s representations are accurate. It should be received and signed prior to closing.
Lender Pre-Qualification Letter
Retail net leased properties, to credit worthy tenants, are considered low risk investments that provide long term stable cash flow. Demand for these properties can be high so it is important to begin the process with the assurance that financing is available.
Using lenders that specialize in NNN leased properties will give the seller confidence and increase the likelihood that the LOI will be accepted. Pre qualifying letters from the lender represent that the buyer has the equity and financial resources to consummate the purchase.