Loan terms for NNN leased property.

Financing, Hard Money Lenders, Private Money
1

I am looking to buy the NNN leased property which has about 15 left on the lease. Cost is about $500,000. I want to get the 75% financing. Tenant is the national chain but not publicly traded so does not have S&P rating. I would like to get the loan which amortize over 25-30 year and atleast 10-year fix.

Can you guys please tell me what type of loan terms I should expect. Basically.
Rate, Fixed Years, Amortization, Cost etc.

2

Since you don’t know if the tenant is investment grade, the interest rate will vary. Rates are usually fixed at a certain spread over the US Treasury yield. The rate is also dependent on the credit of the tenant and the lease. On investment grade tenants, the rate ranges from 5.5% to 7%.

Most terms are fully amortizing with Lease term on investment grade tenants. Other loan programs offer 5, 7 & 10 years.

Costs are loan fees, appraisals, environmentals, etc. I would budget at least 3% of the loan value for these and other closing costs.

Regards,
Patti Porter

3

Patti,

Thanks for the quick reply. Can I have a financial contingency in the sales contract which states that I need to get the loan with the terms below or better:

Loan amount: 75%, Amortization: 25 years, Rate: 6% fixed for 10-years, Points: 0

Is it usual to put contingency like this in the contract.

4

Yes, you can put anything you want into the sales contract but that doesn’t mean that the seller has to accept those terms.

Did you receive a package from the realtor or the seller that has a copy of the lease? Have you received all of the income & expenses for the past 3 years for the property? If you have that info, you can take it to a lender to get a LOI.

Regards,
Patti

5

Patti,

Thanks. I will try to get all the relevant documents including lease and get the letter of intent from bank before doing the sales contract.

I agree seller will probably have issue with putting the strict loan terms in the contract.

6

I also wanted to find out.

  1. Is LOI from bank a sure thing.
  2. If I am working with the mortgage broker instead of the bank directly what should I request. What if they back off before closing or ask for extra fees.

I just want to find out how investor usually do this.

7

A LOI from a lender is contingent upon due diligence of the lender (appraisals, etc).

When working with a broker, there should be a signed fee agreement in place before closing. This fee agreement just covers the broker’s fees. Any fees being charged by the lender will be given before closing.

Patti