How to find a 7% essential business leased commercial property? Commercial business deals off MLS?

Even if you’re not a commercial real estate investor, you should understand how to find a property with at least a 7% cap rate from a tenant who is an essential business.

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Now for today’s class on finding essential business rented commercial…

7% essential business lease?  How can I find one?  How to find a 7% essential business leased commercial property for commercial real estate investors.

Indy Anna explains: 

  • Are these deals still available -even from the MLS?

  • What does essential business mean?

  • The benefits to essential business leases for real estate investors 

This is actually a class based on a situation this week, and it’s a question or property task I’ve been asked about finding before, so I wanted to make a little video about it for others out there in the same real estate investing boat. 

These are usually CASH deals.

To be clear, most often these are cash deals, and while the idea of cash deals for most investors are to be no more than 60% all in or totally invested, on these types of deals we are focusing primarily on the type of leasee – is it an essential business or not, and the cap rate. 

For this specific deal, I was given a budget of $1M to work with and the criteria of it being a 7% cap rate as well as being an essential business. 

Why is the “essential” part important?

Here’s why the essential business portion of the transaction is important; COVID 19. During the height of the COVID 19 pandemic, the differentiation between what people wanted vs what they needed truly came into play. 

This limited the number of folks out, including employees as well as set (even if State by State defined at some levels) what was a must as opposed to a want. 

Why is this important for an investor? 

  • If there is another outbreak/pandemic, you can be more assured your tenant will remain open as an essential business, money still comes in

  • In some cases these small yet essential business were still able to revise PPP loans 

  • In other cases, due to limited (even extreme at times) these essential business were in near immediate Government contracting as suppliers etc, once again,  being more assured economic stability

If you were looking to be as sure as possible during all of 2020-2021 and beyond, the safest place to know where your tenants reside, was under the label of an essential business.

Wherever you are in the US, at the height of the COVID 19 Pandemic, it’s likely you were still able to get into the grocery, the doctor, the pharmacy, etc. while these are in some cases independently owned by the retailer/franchisee, etc. in most cases these are long term commercial leases. 

Think of this from both sides, including the landlord.

Thinking about being on the landlord side of one of these is more appealing to many commercial investors as we continue on with a new outlook on the definition of business in a want vs need capacity. 

Here’s an example of these business tenants:

Less than 5 miles away from where this video is being recorded there’s a vacant property of about 100,000 SqFt. and it’s been vacant for over 15 months at this point. I’ll call it property “A”.

Just across the street from this vacant building is another property at about the same 100,000 SqFt. That has remained open the entire span thus far of the COVID 19 Pandemic. I’ll call this one “Property B”.

Two properties with “different” cap rates?

So we have two properties, similar in size, similar in accessibility from various roads, same property tax rates, same almost everything- apart from cap rates. Property ‘A’ had a cap rate of 10% and property ‘B’ had a cap rate of 8%. It makes no sense really for property ‘B’ to still be open now without ever closing vs property ‘A” to have closed immediately and stayed closed, now vacant- with ONE exception;

Property “A” was a movie theater, whereas property “B” is a large immediate care facility. There you have the biggest single reason for a commercial property investor looking at investing in a space where an essential business lease is in place. 

Now, to be clear on this and ‘Can it be done?’

Well it sure can, and I’ll explain this as well.  

Directly from the MLS, I was able to find a commercial space, right under $1M, with a cap rate of 9%, for an essential business. Previous to this happening, I have been able to find these deals at each request just the same, as it’s almost an untapped source of scouting for commercial investors. 

This can easily be done in almost any area -even if your purchase price point is different and location specific- and if not from the MLS, there are various sources of off malert commercial deals in almost every area. 

I’ll run over a few of these essential business for you as well just to be clear;

Grocery stores, Pharmacies, Medical offices, Big box stores, convenience stores, banks, mail/post.  Shipping offices, hardware/home supply, pet supply, vets, laundromats, gas stations, construction centers/firms, ware houses, hotels, agriculture, farmer’s markets, law firms, insurance providers, food processing, food banks, underprivileged outreach/support programs, home service professionals/techs, childcare for essential workers, police, fire/rescue, teachers

Now some of these vary state to state, so it obviously pays to verify before sending off an offer/letter of intent for a commercial property you assume to be occupied with an essential business lease, but as a general idea, these should tell you what to begin searching for.

So in summary:

I’ve told you why an essential business occupied lease could be a wise commercial investing choice or at least why some commercial investors are looking at these specifically, what defines a commercial deal with an essential business occupied lease, and told you of an example pulled straight from the MLS this week. 

So that’s it make sure to go BigReia.com and get our list of over 100 FREE ways to find motivated sellers, how to buy and sell companies at light speed and retire in the next year with over 30k/month coming in on auto pilot: BigReia.com go there and you’ll…

Make the Universe Smile.

Indy Anna
Love (at) BigReia.com
317- 969-5619 (Yes, that’s my real number and I actually answer so please text me first Thx!)

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Make the Universe Smile.

~ Indy Anna
Love (at) BigReia.com
(YES that's my actual Direct Line and I really do answer lol, so please text me first Thx!)

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