This is my first post here.
I need to buy a commercial property via a 1031 exchange.
The first option would be buying a single NNN property. There are many choices that are overwhelming. I am thinking of a newer Dollar General store.
A 2nd option is a TIC/DST with 5 Walgreens that would have less risk than the DGs but with less cap rate. I owned several apts with this method and know the pros and cons but some negatives don’t apply to Walgreens because the rents are guaranteed vs variable rents with the apts which during the recession reduced payments.
Most DGs exist in smaller areas that have cap rates of 7.0 - 7.25. I have found a few in larger areas with cap rates of 6.65 or 6.9 or so. If I get the lesser priced properties, I get more cash flow but more risk that if DG leaves the area, I will have an empty building to try to rent out later. The larger areas have prices that I might not be able to afford because my individual finances/bank financing guidelines force me to put more down than I can afford.
All brokers are promoting their properties. Is there a web site or links that can advise on this other than this forum or is this the best source?
Has anyone here bought either of the above 2 and what are your feelings.
I would appreciate any comments on these two types of RE investments.
Thanks, Rick
I would much rather have a solid stable tenant like Walgreens than the higher cash flow. Usually, this type of tenant will sign a 10-year lease, which is great.
DG is a great tenant. Recently upgraded to a corporate credit rating of BB+. The risk is not as large as it seems. They are continuing to grow, and rapidly expanding in CA.
Someone to talk to is Joe McClary at L3 Investment Properties out of St. Louis. They work with buying specifically DG’s, but they constantly help broker the ones they cannot buy.
Even just for guidance he is a good place to start. And no I am not Joe McClary, or work for him. Just a friend.
Dollar general is a fine company and will continue to grow given the week economy. The question you need to ask is how valuable is the land underneath if they leave some day. What else can you put in there.
You were asking about tenants in common vs owning a property like Dollar General. I have not purchased a TIC before, but I always shyed away from it because it seemed like your money is tied up and it can be very hard to get it out if you needed it. I always like having the control of the property if I can.
Hopefully you completed your exchange successfully. Our company is very experienced in TIC management. If you have any questions PM me, we can help you out.