NNN Property Loans

NNN property loans have a few intricacies that set it apart from the typical commercial loan programs.  Corporate guaranteed leases (among other category strengths) have attracted many prominent capital sources to this arena.  However, due to special use nature of many NNN buildings (For example a fast food restaurants, drug stores, etc) and that many are occupied by single tenants, lenders can be overly cautious. 

Currently, credit sources for NNN properties are becoming more and more conservative within this category due to the “credit crisis”.  Many preferred nnn lenders within this category have simply stopped lending.

NNN Lenders

Below is a brief discussion of what NNN lenders look for in a transaction.  Keep in mind though that all transaction are unique and need to be considered and structured carefully.  

LTV

Loan to value, meaning the value of the property versus the loan amount, seldom exceed 65% and is commonly capped at 60% within the NNN category on refinances.  However exceptions are made with this.  An example would be with strong corporate guaranteed leases.  Purchase transaction normally range from 75% to 80% though special use properties such as fast food restaurants will be at app 70%. 

DSCR

Debt Service Coverage Ratio restrictions are typically capped at a relatively low 1:1.10.  Meaning that for every $1.10 of net income the property produces the mortgage payment will not exceed $1.00.  Said in another way, after all expenses and mortgage has been paid, the owner needs to net at least $.10 to qualify.

Exceptions can be made with this as well.  It is not unheard of for major drug store occupied properties to qualify for DSCR as low as 1.05.    

Tenant Evaluation

Much analysis goes into evaluating tenant’s strength.   Lenders scrutinize the tenant’s financial position, time left on the current lease and other relevant information.  The time remaining on the current lease is of particular concern on a NNN property refinances.  Many banks/ lenders will not allow the fixed period of the loan to extend the remaining term of the lease.  Some traditional banks will not allow the loan amortization period to exceed the length of the lease.

Property Analysis

Market value and market rent will be evaluated and compared to the subject property.  Age, appearance, location, accessibility, and local market conditions, as well as other factors are considered. 

Credit Worthiness

The personal credit worthiness of the borrower will often be checked though not as much weight is put on this compared to other transactions, such as owner occupied deals.  For corporations, business performance and credit rating will be evaluated.

We offer some of the best NNN property loan options in the market - call 248 885-8797 to discuss your situation or fill out our mini commercial loan application form for more meaningful answers.

248 885-8797

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