by Annette Cooper
These go fast. There is a national market for these investments through the internet searches.
Many factors go into a successful acquisition, but timing and luck are often the most pivotal factors. To a large degree, we can influence both. If there is such a thing as a successful buyer profile among our regular clients, it would be the simple marriage of the following:
- A buyer who is consistently committed to taking decisive action in a timely manner.
- A buyer with realistic acquisition criteria who maintains practical flexibility when considering opportunities that come reasonably close.
Once you decide to trade or acquire property in an exchange context, the following are simple yet critical strategies that will help ensure your successful acquisition.
With an open mind, keep the search parameters as broad as possible. A “blinders on” approach from a geographical, tenant or ROI perspective can severely impede the search. It can cause you to miss out on some excellent but briefly available opportunities on the periphery.
- Consider more than one tenant category e.g., restaurants, drug stores, post offices.
- Consider both corporate and franchisee leases.
Geographical parameters could involve regions vs. cities in several regions. Include the San Francisco Bay Area. Remember that this is but one region with extremely limited supply, where demand far outpaces that supply. There are many other viable and superior opportunities throughout the country.
Beware the Quest for the Unicorn! Certain properties are known in the industry as “unicorn”. An example is a twenty year NNN Corporate AAA rated tenant lease with 5% increases per annum. It is located at Main and Main at a high traffic, signalized intersection in a major and rapidly growing metro area. This would include an 8.5% initial return priced in the $1,000,000 range or below. The unrealistic quest for these types of properties can squander precious time and rapidly derail your search.
BE PREPARED TO ACT QUICKLY
Competition for single tenant NNN leased property is extreme and the time and opportunity to act is limited. Quick responses and consistent decisive action are critical factors in securing your acquisitions. Many searches and transactions fail due to prolonged discussions and requests for input or validation from multiple parties. Risky pontification and analysis of points ultimately may not be significant before due diligence. Meanwhile, another party is simply taking action.
BE WILLING TO FOLLOW MARKET DRIVEN OFFER PROTOCOLS
A typical competitive offer in the current market would be structured as such:
- At the asking price
- Twenty days of due diligence. It is important to note that although the recommended due diligence time appears short, normally all due diligence is available in a very organized form. Review of this material can be completed in a very short time frame.
- Close of Escrow in 30 to 60 days.
- All cash where possible. The financing on these properties is very straightforward and can be done parallel to the due diligence. If financing is used, establish financing relationships and paperwork as soon as possible to expedite the process.
- You want time to be on your side. Offer presentation terms outside of these general parameters (or with the expectation of a counter offer, for example) may cost you critical time when other parties are presenting offers based on marketed terms.
- Be prepared to incorporate the seller’s preferred offering format.
START RESEARCH AND SITE SEARCH EARLY
- Hire a commercial agent or agent team dedicated to a focused, productive search. There is far more to actually securing an acquisition than surfing the internet and identifying random properties. A lot of the critical work actually begins after the initial search. For example:
- Continually tracing and confirming availability of properties meeting your criteria.
- Clarifying and following offer and letter of Intent protocol precisely so that your offers receive serious and immediate consideration.
- A competent, dedicated agent can keep the search and acquisition process fast paced and well managed. Let your agent know your general parameters and keep them apprised if these parameters should change at any time.
- Make it a goal to have your three ID properties under control (contract or LOI) in the first three week of the ID period.
HAVE FUN WITH THE PROCESS!
This can be a fast paced, interesting process where you’ll see and learn a lot. Have confidence that what you’re going to be buying is a high demand product. In the very worst case scenario, you have a flexible exit strategy in which you can typically resell without a fuss.
Focus on areas you would like to visit or vacation!
Copyright: Annette Cooper