Owning a MTNL NNN property can often times be very rewarding but requires considerable more effort than a STNL NNN property. The misinformation is that there is nothing to do with research when buying a NNN MTNL property. There is a lot of review and steps that go into buying a good MTNL NNN property. Notice I said a good property. There are tons of mediocre to bad properties out there where a buyer could lose some or all of their down payment investment. Those are easy to buy and hard to get out of.
Developers and listing brokers often love new buyers to a space with money because they can easily manipulate them into paying a premium for sub-standard properties. There is a reason the developer doesn’t want to own the property long term because the tenant is weak, the location, or both.
With buying a MTNL NNN property you need to think about the value today, the value going forward, and the value when you want to exit the property and buy into something else. After you work on tons of transactions as a broker and also as a buyer yourself you learn things along the way.
Don’t work with dabblers. These are people that know a little about lots of things but not an expert in anything. They could be real estate brokers, mortgage brokers, commercial attorneys, etc. We ask, for instance, if attorneys practice litigation work along with transactional work. The reason is those attorneys even if competent are often in court and not available to work on a transaction in an expedient manner so the deal takes way longer to close than it should. The longer a deal goes without closing the more expensive the legal fees tend to be and the less chance of it closing due to deal fatigue and other timing factors with the buyer and the seller.
While under purchase and sale agreement the basic process goes like this.
- Purchase and sale agreement signed.
- Buyer wires in earnest money and confirmed/received by attorney or title company.
- Escrow is opened and the inspection/ due diligence period starts.
- The mortgage broker receives the term sheet from the lender. The (term sheet) spells out under what conditions the lender will do a loan and requirements to obtain loan approval.
- Buyer signs the term sheet for lender quote they like and then send in lender’s deposit to start the ordering of the reports (Phase One, ALTA Survey, Appraisal,etc.).
- Reports are bid out by the lender and buyer chooses what timeline and cost provider they want to select.
- Pre-lim title is pulled and buyer commercial attorney reviews.
- During due diligence the leases and any amendments are reviewed along with any special association agreements, old survey, phase one,etc. Being that it’s a retail center versus STNL single-tenant the leases could all be done by one attorney or different attorneys so you have to look at each lease carefully.
- Tenant interviews can be conducted if wanted on the businesses in the center. Usually not on the larger credit tenants but the small to medium size companies.
- Estoppel and SNDA language are approved by lender and buyer’s attorney before being sent out to tenant for signature.
- Buyer forms LLC if not already formed for entity to hold the title for property in.
- Buyer orders engineer inspection of the building.
- As each report comes back any requests are made to the (phase one environmental if further testing is needed, title comments from updated survey, requests for repair with engineer inspection, appraisal review if did not appraise for purchase price or higher).
- Lender reviews reports in underwriting and then if all looks good approves the loan.
- A date is set for closing on the property and lining up mortgage docs for signing.
- The buyer gets the leasing administrator contact for the tenants and gives required information so that tenant can set up payments to the new owner.
- A change of ownership form is sent to the each tenant notifying them of the upcoming closing with new owner.