Is Buying a Property For-Sale-By-Owner a Good Idea?
With the readily-available online sales cycle, it’s easy to think you don’t need personal service for much of anything anymore – you can feel like an “expert” with just a few days of research. Seemingly thorough and accurate data is at your fingertips and sellers are accessible, especially when it comes to real estate. However, entrusting the future of your wealth to a for-sale-by-owner (FSBO) transaction or using the seller’s agent to buy commercial property – particularly a triple-net (NNN) lease investment – could be disastrous.
Avoid Wasted Time & Financial Upheaval
With NNN lease investments, you definitely want to avoid the FSBO buying process, and buying from the seller’s agent also presents risks, namely limiting your ability to perform due diligence on the property. Innumerable complications, undisclosed details, and hidden lease responsibilities often arise when these investments are executed without an advisor. Added stress, time, and costly expenses can detract from your wealth and financial goals and create a long-term financial burden.
So, how do you ensure you buy the right NNN property for your financial goals and lifestyle without losing money and wasting time? By partnering with a specialized triple-net lease buyer’s advisor with industry experience and a thorough approach. This beneficial partnership is necessary for a safe, solid, financially-sound investment – whether you end up with a NNN for-sale-by-owner property or one that’s listed by a seller’s agent. And it costs you nothing.
No Additional Costs & Proprietary Services
There are no added costs to partner with a buyer’s advisor. In any commercial real estate transaction, the seller pays the commissions and fees. This is true with NNN lease properties as well. The compensation is built into the price of the property and takes nothing away from the buyer. Remember – the FSBO or seller’s agent is trying to get the highest price for their property. Your advisor will negotiate a realistic price, make sure there are no unidentified costs and perform due diligence on the property to ensure it is the best investment for you.
Quite often, when you find a property on your own that seems like a perfect fit, your advisor may uncover reasons why it is not the optimal option for you and show you other properties that better represent your goals. Advisors use tools and technology that aren’t available to the general public, provide in-depth market knowledge, help you decode inflated cap rates, avoid mistakes, negotiate on your behalf, provide financing sources, structure the deal, and more. Beyond just cost savings, these benefits often equate to a higher return-on-investment (ROI).
“Proprietary digital tools are important for buyers’ advisors, but investors searching for an optimal NNN investment still need personal attention and the knowledge a buyer-advisor relationship offers. With a triple-net lease transaction, there’s too much at stake to shop online and buy from a FSBO or the seller’s agent.” Chris Schellin, President/Principal, Westwood Net Lease Advisors
Find the Right Investment
Another reason to avoid FSBOs or buying from the seller’s agent is that good triple-net lease properties sell fast and many are never listed on the open market. Others are very complex and require extensive evaluation. Existing properties, new builds, and prospective developers are also rarely publicized. To locate the right property requires an advisor who knows the market and is known in the market. This partnership lends a distinct advantage in many areas and helps you make the most of every dollar invested.
The Value in Securing the Right Investment
Our advisors reviewed more than 20 properties for a buyer before finding the perfect investment for his goals: a one-of-a-kind two-tenant center with a Chick-Fil-A and an AT&T store. Typically, Chick-Fil-A goes for a 4 to 4.25 cap rate, but we were able to diversify into two tenants with a higher cap rate because of AT&T’s presence.
Since this property was a 2-tenant building, it became a more complicated NNN deal. It required more CAM details such as expenses for a parking lot, landscaping, and utilities, and then cross-referencing the lease to make sure there was no “slippage” in either lease. The goal of any multi-tenant retail center is accounting for all expenses and thus confirming no surprises during the first year of ownership.
As a value-added step in our process, our broker located a credit union that provided the financing; we sourced both property and lender. The 2.7-million-dollar closing went smoothly within 45 days. In the end, the investor was extremely happy. He deferred significant capital gains in the six-figure range. He transitioned from a management-intensive investment to a new opportunity with a similar yield but less hands-on responsibility. Both of his low-risk tenants are operating with great stability, and as a bonus, the property is located 20-minutes from his residence.
Do You Know How to Diversify Your Portfolio with NNN Properties?
Even if you have the extensive investing experience, do you know how to use NNN investments to diversify your portfolio? Unlike other types of investments, properly chosen NNN properties are tangible assets that preserve cash flow and yield a reliable, passive income for 10-20 years with little or no owner responsibility. They bolster any investment portfolio with a stable income, immediate tax benefits, and the ability to pass them to heirs tax-free. Plus, the physical asset typically appreciates, giving you financial leverage.
As in the example above, it may also be worthwhile to diversify within your NNN investment portfolio by considering more than one of these properties. Owning two or more can offer greater security and growth, stronger ROI, and long-term predictability. With your advisor, you can determine what is right for you and your future, whether it is one or more triple-net investments.
Benefits of a Buyer’s Advisor
As you can see, comprehensive knowledge and experience are necessary for acquiring the right property; one that’s safe and structured to your financial and lifestyle objectives. A reputable buyer’s advisor as your personal representative will give you that surety, along with many other benefits.
At Westwood Net Lease Advisors, the buyer-advisor relationship starts with us getting to know you and your goals. Then we help you find a NNN investment (or two) that fits your criteria, including some you may not have considered, and walk you through the entire process from offer to closing. Not only are we the only NNN specialists in the nation who primarily represent buyers, we provide the following for clients at no cost.
- Objective advice, education, knowledge, and advocacy.
- An evaluation and a risk tolerance assessment.
- Explore the best price and cap rates and different classes of investment opportunities.
- Locate an inventory of properties that fit your goals; including some that aren’t even on the market yet. We have a nationwide database and industry connections to optimize our search.
- Assist with negotiations on the price and lease terms to meet your financial and lifestyle goals.
- Present a Letter of Intent (LOI) as soon as possible. As a buyer, this letter demonstrates to the seller that you are serious. It is a bridge between your intent to buy and the legal sales contract; it also reflects integrity.
- Evaluate tenant financials and credit ratings.
- Work with you to maximize the many detailed financial and tax considerations, like 1031 exchanges and cost segregation.
- Explain and explore lease terms such as termination dates, opt-out clauses, common area maintenance charges (CAM), and more.
- Help you navigate the lengthy and complicated documentation, which differs from state-to-state, city-to-city, and municipality-to-municipality.
- Connect you with our reputable network of providers, including financial sources, closing agents, title companies, and legal counsel, as needed.
To Wrap it Up – Why a NNN Buyer’s Advisor is Necessary
There are many reasons to avoid buying a NNN property on your own from an FSBO or seller’s agent. Without an experienced buyer’s advisor, you may end up in a complicated, lengthy process that wastes valuable time and extra money and ends with you owning a less-than-ideal property.
Nothing outweighs the benefits of a specialized advisor as a partner when it comes to investing your hard-earned money in NNN properties. Our Westwood Net Lease Advisors team is passionate about helping our clients enjoy fruitful investments that offer time-freedom and steady monthly income. Contact us today for a free consultation, 314-997-5227.