The relationship of a Commercial Real Estate’s Cap Rate and a Federal Reserve’s 10-Year Treasury Rate

September 18, 2015July 21, 2018 dajkgroup art collector, asset management, Business Consultant, business entity, business finance, business owner, Entrepreneur, finance, interior designer, investment, investor, net lease, NNN CRE, real estate Art Collector, Art loan, Asset based finance, Business Consultant, business entities, business incomes, business owner, commercial real estate acquisition, creative finance

Commercial Real Estate’s Cap Rate is average 436 bps over 20 years reference to Federal Reserve’s 10-Year Treasury Rate. In fact, its average from 1990 to 2000 is 450 bps and its average from 2002 to 2015 is 425 bps.

Transactions in 2015 are on course to exceed pre-recession peak levels, and most property sectors continue to see inflows of equity and disciplined underwriting by debt providers. With positive economic trends lifting gauges of property performance, commercial real estate remains a favored asset class on a risk-adjusted basis.

Another words, the sophisticate and savvy CRE’s investor are studying and analyzing carefully its Federal Reserve’s 10-Year Treasury Rate in order to make an informed decision on his next acquisition. It would help reduce his risk significantly.

Commercial property sectors continue to perform well amid this extended period of low interest rates and the Federal Reserve’s decision will not disrupt property performance

The Federal Reserve opted Thursday 9/17/15 to maintain its benchmark lending rate at or near zero percent. While acknowledging that the U.S. labor market continues to improve, the central bank also heeded softer conditions in foreign economies in reaching its decision to defer the first hike in the Federal Funds rate in approximately nine years. Fed Chair Janet Yellen and voting members of the policy committee will proceed cautiously, monitoring for contagion risks from other countries that could adversely affect U.S. economic performance.

The Fed’s next opportunity to take up the rate hike question comes at its meeting next month, but it may wait until December to act. Until the next meeting, the Fed will scrutinize incoming data on economic momentum, inflation trends, and international volatility. Mortgage spreads widened during the summer in anticipation of a rate increase, and little appreciable effect on spreads is likely to occur in the near term.

The central bank’s decision to hold will likely spark a new round of questions about the strength of the U.S. economy in spite of relatively strong underlying fundamentals. Through August, the labor market had added an average of 212,000 jobs per month, an amount less than the pace set in 2014 but sufficient to support a forecast of 2.7 million positions this year. Factors weighing on the U.S. economy, however, include soft exports stemming from the strong U.S. dollar and anemic inflation principally related to low gas prices. Core inflation, which strips out volatile food and energy, rose only 1.8 percent year over year, below the Fed’s target threshold of 2.0 percent.

Commercial property sectors continue to perform well amid this extended period of low interest rates and the Federal Reserve’s decision will not disrupt property performance. With job growth generating new commercial space demand that dramatically outpaces construction levels, vacancy in the primary property segments remains on track to decline this year and support additional rent gains. Apartment construction has ramped up, but favorable demographic trends and challenging conditions for first-time homebuyers will continue to sustain extremely low vacancy in the multifamily sector.

Low-interest rates, steady performance gains, and competitive yields are supporting investment in a wide array of commercial properties. Transactions in 2015 are on course to exceed pre-recession peak levels, and most property sectors continue to see inflows of equity and disciplined underwriting by debt providers. With positive economic trends lifting gauges of property performance, commercial real estate remains a favored asset class on a risk-adjusted basis.

Learn more of investment in Net lease CRE

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Decade of Peace sculpture: “The Sporting Chances for Peace”

This limited edition #1 is no longer available for sale. However, the remaining of Edition 1799 sculptures is available for pre-order. Please note we are also seeking for:

Art Collectors/Investors
Sponsors
Long-term Lease

We are processing and engaging with our investor regarding Limited Edition #1. When it’s finalized in 4Q 2015, the press conference will be announced the owner of this Edition #1. Our investor has committed to the purchase price of $US 50 million.

Once this public announcement is scheduled, our remaining editions’ price will be raised at a minimum of $US 500,000.

[Learn more…]

Partnership

We are proud to be a partner of HEAG Medical Community of Ghana. [Learn more…]

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Net Lease’s Sale leaseback and Built-to-Suit Strategy

September 9, 2015July 21, 2018 dajkgroup asset management, Business Consultant, business entity, business finance, business owner, Entrepreneur, finance, investment, investor, net lease, NNN CRE, real estate Asset based finance, Business Consultant, business entities, business incomes, business owner, case study, commercial real estate acquisition, creative finance, entrepreneur

Net Lease’s Sale-leaseback and Built-to-Suit Strategy

The growing business who owns real estate can raise an inexpensive working capital and/or debt reduction with Net Lease’s Sale-leaseback and Built-to-Suit Strategy.

Sale-Leaseback Strategy

Sale-leaseback strategy is a form of financing in which a company sells its real estate for cash and simultaneously signs a long-term lease with the buyer. Sale-leaseback transactions provide the lessee company with a source of capital that is an alternative to other financing sources such as corporate borrowing, mortgaging real property or selling shares of common stock.

A Seller/Tenant is able to convert the value of real estate assets into working capital it can use to:

Pay-down debt
Fund acquisitions
Reinvest in the core competencies of its business

Build-to-Suit Strategy

Through build-to-suit strategy, Investor/Lender (“Investor”) provides a growing company with the funding for the expansion of an existing facility or the construction of a new facility in a different location. Investor can source, facilitate, arrange, structure and close the build-to-suit transaction.

The build-to-suit provides innovative financing for:

Expanding existing facilities/constructing new facilities
Debt reductions
Mergers & acquisitions
Leveraged/management buyouts
Corporate restructuring/exit financing
Acquiring addition facilities, technology, and equipment to grow business
Transition out of a synthetic lease, mortgage or other binding debt instruments
Matching long-term assets with long-term liabilities

Case Study: WPC’s Key Facts of Net Lease’s Sale-leaseback and Built-to-Suit Strategy

W. P. Carey Inc. announces that it has acquired a portfolio of three truck and bus servicing facilities for approximately $42.9 million. The facilities, two in Germany and one in Austria, were purchased from the developer and are net leased to wholly-owned subsidiaries of MAN SE for a period of 15 years. (PRNewsFoto/W. P. Carey Inc.)

Well-established, industry-leading tenant: The MAN Group is one of Europe’s leading producers of commercial vehicles, engines and mechanical engineering equipment. It is a publicly traded company with a market capitalization of approximately $15 billion and is 75% owned by German automotive group Volkswagen AG.
Critical, well-located facilities: The three facilities, originally built to tenant specifications, are among the largest service stations operated by the MAN Group and serve as an important sales driver for its 24/7 fleet repair and maintenance servicing operations. Located on arterial routes, the facilities benefit from the high commercial traffic flow that connects several major German and Austrian cities and links Europe’s eastern and western markets.
Long-term net leases with built-in rent growth: All three facilities are net leased, with a remaining term of approximately 15 years and CPI-based rent escalations.

Reference: NEW YORK, Sept. 9, 2015 /PRNewswire/ — (NYSE: WPC), a real estate investment trust specializing in corporate sale-leaseback and build-to-suit financing, and the acquisition of single-tenant net lease properties, announced today that it has acquired a portfolio of three modern truck and bus servicing facilities for approximately $42.9 million (€38.9 million). The facilities — two in Germany and one in Austria — were purchased from the developer, Wohnungsunternehmen Semmelhaack, and are net leased to wholly-owned subsidiaries of MAN SE (The MAN Group).

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Net Lease Case Study: Checkers Restaurant [**ABS SLB (15)]

August 16, 2015July 21, 2018 dajkgroup Business Consultant, business finance, Entrepreneur, investment, investor, net lease, NNN CRE, real estate Business Consultant, business incomes, business owner, case study, commercial real estate acquisition, creative finance, entrepreneur

**Absolute: ABS

**Sale leaseback: SLB

Checkers – Part of Rare Portfolio of 9 [ABS SLB (15)]

Address: 3150 East Bay Drive | Clearwater, FL 33771

Purchase Price: USD 868,400

Fixed Annual Income: 4.50%

Offer Summary:

Price: $868,400	Cap Rate: 4.50%	Property Type: Retail
Building Size: +/-738 SF	Land Area: +/-0.42 Acres	Property Use: Restaurant
Current NOI: $580,342 (Portfolio)	Lease Term: NNN	Location: Clearwater, FL

Location Description

Clearwater, FL is a year round vacation destination, with a strong population of over 110,000 within a 3-mile radius of the subject property. The property is on a desirable hard corner along a dense retail corridor with close proximity to Publix, LA Fitness, Winn-Dixie, Wal-Mart, PTEC Clearwater campus, Southeast College, and The Belcher Soccer Complex. The St. Petersburg-Clearwater International Airport is +/- 4.3 miles away.
Portfolio Locations: AL, FL, GA, and MI.

Highlights

Clearwater, Florida Hard Corner Location | Vacation Destination – Clearwater is a year-round vacation destination, with a strong population of over 110,000 within a 3-mile radius of the subject property. The property is on a desirable hard corner along a dense retail corridor with close proximity to Publix, LA Fitness, Winn-Dixie, Wal-Mart, PTEC Clearwater campus, Southeast College, and The Belcher Soccer Complex. The St. Petersburg-Clearwater International Airport is +/- 4.3 miles away.

Part of Rare Portfolio of 9 Assets with Geographic Diversity – The subject property is part of a portfolio of Checkers’ last corporate-owned stores, offering investors immediate geographic diversity across four states in the portfolio at a discounted total portfolio price. All stores have been in operation for over twenty years and a majority of the stores have been upgraded recently.

Corporate Sale-Leaseback | 15-Year Term – Long-term sale-leaseback opportunity backed by a highly secure restaurant chain. Each lease will include two (2), five (5) year renewal options.

Absolute NNN Lease – No landlord responsibilities.

Strong Rent Escalation – The Checkers leases include 10% rental increases every 5 years, providing a hedge against inflation.

Low Rent-to-Sales Ratio – All locations have a low 6% store rent-to-sales ratio, allowing sufficient operating cushion for each restaurant.

Growing QSR Chain – Checkers opened 35 new locations in 2014 and has plans to continue to grow in 2015 with 80 locations approved.

Established Chain with High Average Sales – Checkers is the nation’s largest chain of double drive-thru restaurants with over 800 locations. In Nation’s Restaurant News’ Top 100 census, the company is ranked No. 89 in U.S. sales. The average corporate Checkers reported +/- $1 million in net sales.

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Net Lease Investor’s Options and/or Alternatives

August 11, 2015July 21, 2018 dajkgroup asset management, Business Consultant, Entrepreneur, investor, net lease, NNN CRE, real estate Business Consultant, business incomes, business owner, commercial real estate acquisition, entrepreneur, investment, investor, net lease, Net lease Buyer, NNN CRE

Net lease investor’s objective is:

1) his target CAP rate;

2) with high or with the lowest net lease management fee.

There is a San Diego-based Net Lease Management.

http://netleasedmanagement.com/

“Net Leased Management is a cost-effective administrative and management support solution for net-leased property owners. For a small monthly fee, Net Leased Management provides accounting services, monthly financial reporting, lease administration, property-tax compliance and insurance compliance; handles any landlord obligations; and conducts site visits as needed. We also provide access to a master insurance policy for investors to capitalize on bulk pricing and increased limits.”

[Full article…]

Please note a Higher CAP rate is higher the risk and more involvement with property management.

Is there any alternative without paying fee or paying the lowest to net lease management?

Yes, I highly recommend all our clients/investor to select only a true triple net lease or an absolute NNN lease.

The more fees investor is paying for a third party; his return of investment would be reduced proportionally as well.

In fact, different net lease investor has different investment objectives. My task is providing all options both pros and cons and both advantages and disadvantages.

Strategically, when the net lease investor combines with his high taxable income with his net lease investment, it would be a greater benefit for him in a long-term investment.

This strategy would accomplish reducing taxable liability: converting his short term to long term gain which in turn will be taxed at the lowest tax bracket, his fixed income from lease revenue is a passive income to an investor. [Learn more…]

I would inform all my clients about these options and they need to decide how they would like to proceed.

[Learn more…]

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Net Lease Case Study: Kevin OLeary’s O’Shares ETF versus Net Lease Strategy

July 14, 2015July 22, 2018 dajkgroup asset management, Business Consultant, business finance, business owner, Entrepreneur, finance, investment, investor, net lease, NNN CRE, real estate Business Consultant, business owner, commercial real estate acquisition, creative finance, Dollar General, entrepreneur, Net lease Buyer, NNN Investor

Exchange Traded Fund Definition

An ETF, or exchange traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold. ETFs typically have higher daily liquidity and lower fees than mutual fund shares, making them an attractive alternative for individual investors.

Because it trades like a stock, an ETF does not have its net asset value (NAV) calculated once at the end of every day like a mutual fund does.

Kevin O’Leary’ OShares

After she died I became the executor of her estate and for the first time saw the results of 50 years of investing in only dividend paying stocks. Her returns were stunning. She was not a financial advisor but she believed in the principle that you should get paid while you wait. To her a stock that did not pay a dividend was simply a speculation not an investment because you could only make money if the stock went up. Dividends assured her of income and she would only spend that.

Seeing the results of her philosophy changed my mind about investing forever. I did some research. Did you know that over the last 40 years over 70% of the markets return came from dividends, not capital appreciation? That settled it for me, today I never invest in stocks that don’t pay dividends.

Full article at https://www.linkedin.com/pulse/my-love-dividend-paying-stocks-made-me-create-own-etf-kevin-o-leary

Our Net Lease Strategy has 4 similar characteristics and 4 distinct and unique advantages over dividend paying stocks

Our comments on 7/14/15 14:15 PST

Mr. O’Leary,

Thank you for sharing your story regarding your mother’s investment philosophy.

Investor only requires to master few investment principles/strategies so that he can invest money on his own without a financial advisor. Of course, he needs to a) search and select right dividend paying stocks; 2) strategize for a long term objective is 40 to 50 years.

A similarity with your mother’s investment philosophy, our Net Lease Strategy has 4 similar characteristics and 4 distinct and unique advantages over dividend-paying stocks.

The investor in Net Lease property (“Net Lease” or ”NNN”) also requires to master top six (6) net lease terms.
The investor also requires to research, analyze, due diligence and review his acquisition. Since lease agreement is guaranteed by a tenant, therefore, tenant’s net worth must be at $US 100+ million in last 12 months. For example, it describes in details in Case Study Family Dollar.
The investor in Net Lease also receives his monthly fixed income, called capitalization rate or short for CAP rate or just CAP. In fact, if net lease properties cannot pay CAP (positive cash flow at closing), it just a speculation.
The investor in Net Lease property understands and seeks for long-term investment objective. It is a minimum of 5 years for Net Lease.
Investor’s monthly income is a passive income, which taxed at lower tax rate than the earn income.
The investor in NNN can leverage using mortgages or OPM if he wants to. This is a great option.
The investor in Net Lease can purchase insurance against his underlined net lease property. This is a requirement for protecting his funds. In contrast, you cannot buy insurance against dividend-paying stocks.
The investor in NNN has full control of his investment. He can re-fi with cash out, cross collateral, sell and lease back or SLB, sell with seller finance or wrap-mortgage.

Additional of the net lease can be found at http://www.dajkgroup.com/net-lease-investment.html. It is including case studies and our monthly selections.

Your Shark Tank’s episodes are always enjoyable, entertaining and packed of valuable investment strategy and creative structured finance.

Thank you for your time, Kind regards

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Net Lease Case Study: Family Dollar

July 3, 2015July 4, 2015 dajkgroup asset management, Business Consultant, business finance, business owner, Entrepreneur, finance, investment, investor, net lease, NNN CRE Business Consultant, business owner, commercial real estate acquisition, creative finance, entrepreneur, net lease, Triple Net Lease

If the middle-class investor “saves” money by investing in mutual funds or 401K, then the wealthy and strategic investor “save” money by investing in net lease or triple net lease.

Highlights:

How much monthly fixed income will investor receive if he invest $US 713,800?
What other benefits when USA-investor invest in net lease?
How much risk when USA-investor invest in this net lease, Family Dollars?
Would you commit to saving and increasing your asset in next 12 months?
Would you commit to learning the Net Lease Strategy you’ve always wanted?
Would you commit to preparing both of those aforementioned objectives?

Please review our previous blogs:

What are the key data from net lease listing?

Who is your tenant? Family Dollar
How much is asking price: $US 713,800
Where is the location: 1060 South Fayette Street, Beckley, West Virginia 25801
What is the rate of return on your investment (Cap Rate): $US 64,599 (Annually)

You want to reduce your risk by select strong credit tenant with strong net worth $US 100+ million. Also, you make sure the Family Dollars will be a guarantee for your lease payment.

How much monthly fixed income will investor receive if he invests $US 713,800?

The annual return of investment, before mortgage and tax, is $US 64,600. If you invest all cash in this Family Dollar, you will receive $US 5,383 a month. Please note your payment is directly from Family Dollar.

Please note this is a passive income (NOT earning income) which is taxed at lower tax rate. The exact tax rate depends on individual entire financial structure. Please consult with your Certified Public Accountant.

Your potential passive income is $64,600 X 15 years = $US 968,984

What other benefits when USA-investor invests in net lease?

Depreciation & Appreciation: For USA-based investor, you may receive additional benefits such as depreciation and appreciation.

Scalability: Also, you are NOT involved in daily operations of the Family Dollar neither repair & maintenance. This means you can invest simultaneously in multiple net lease properties and different locations. Therefore, your scalability is limitless. It’s only limit by how much capital you can access.

Re-financeable & Transferable: You can borrow against it if you need additional cash. You can structure this net lease be transferred to your foundation or business entity at your death event.

How much risk when USA-investor invest in this net lease, Family Dollars?

Political Risk: Select country wisely; preferable is located anywhere in USA or United Kingdom
Mother Nature Risk: Make sure your property insurance cover these events
Tenant Risk: Make sure your lease is guarantee by Family Dollar

Conclusion:

If the middle-class investor “saves” money by investing in mutual funds or 401K, then the wealthy and strategic investor “save” money by investing in net lease or triple net lease.

For further discussion, please contact us for our free 30-min confidential consultation.

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Referenced Net Lease Listing: Case Study_Family Dollar NN

Diagram for illustrating of How using a Triple Net Lease To Create a High Taxable Revenue to a Low Taxable Revenue Legally

Typical Scenario: The Digital Online Business (“DOB”) generates average $US 40 million in last 3 years. Since this DOB has very little on overhead and management’s expenses, it is most likely DOB’s revenue will be taxed at the highest tax rate. Its total taxes’ bill most likely is Fifty Percent (50%) or $US 20,000,000.

How can this DOB minimize his taxes’ bill legally and simultaneously increase his asset?

First, the owner of DOB just allocates $US 18 million for investment in the Net Lease or Triple Net Lease commercial real estate (“NNN CRE”).

Step #1: DOB purchases all cash of the 1^s^t NNN CRE for $US 18 million.

Step #2: Refinance after 3 to 6 months of closing of the 1^st NNN CRE. The loan amount is approximately 70% Loan-to-value or $US 12,600,000. Please note this is a debt finance, the DOB would not pay tax on this $US 12.6 million.

Step #3: DOB purchases all cash of the 2^nd NNN CRE for $US 12 million from his debt finance.

Please note DOB can repeat step #2 and #3 again if he wants to.

After approximately 12 months, DOB creates at least 3 favorable and strategic objectives?

Create a passive residual income approximately $US 1.1 million annually
Create an asset’s value is approximately $US 30 million
His total taxes’ bill is reduced at least Fifty (50%) percent to $US 10 million from $US 20 million.

Please note this NNN CRE strategy can work with lower initial investment. We recommend the minimum is $US 1 million for the time and efforts involving and executing these steps. There is no maximum amount; however it will be fewer selections of NNN CRE once its purchase price begins from more than $US 100 million. Therefore, this investor should anticipate a little bit longer. We would say about 24 months it is more realistic time frame.

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Net lease or Triple-net Lease is an Alternative Solution for Removing 12 Headaches in Real Estate Rental

June 18, 2015June 28, 2015 dajkgroup Business Consultant, business owner, Entrepreneur, investment, investor, NNN CRE, real estate Business Consultant, business owner, commercial real estate acquisition, entrepreneur

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Real estate investment isn’t always a good deal –Written by Brent Wilsey –Published by San Diego Source Daily Transcript – Friday, June 5, 2015****

I have found it is much easier to invest in stocks and get returns that are similar, if not better, without the headaches – Brent Wilsey

Summary of real estate rental in referenced article:

Operating Cost higher than anticipated.
Travel Expenses.
Tenant and property management
California laws definitely favor the renter, not the landlord. Cost of legal ramifications that may come up.
Discrimination laws.
Cost of operating is increased for hiring a property manager.
Cost of operating is increased for not having the cost effective repairman.
Cost of operating is much higher. Therefore your Net Operating Income is reduced.
Tax benefits: All the expenses are deductible and can offset the income that is received. However, some of the losses cannot be deducted until the property is sold.
Operating Cost is including with Certified Public Account (“CPA”)
Investor may be subject to an additional 3.8 percent tax
I have found it is much easier to invest in stocks and get returns that are similar, if not better, without the headaches.

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For an argument sake, let’s agree these 12 issues are concerned to real estate investor’s Net Operating Income (“NOI”). What is the alternative solution for real estate investor? Can real estate investor invest without these 12 headaches?

ABSOLUTELY! The answer is Net Lease or Triple-Net Lease (“NNN-CRE”).

We believe NNN-CRE can remove these 12 headaches for real estate investor. Learn more please review our previous blogs:

References:

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In Hong Kong, the “Mosquito Apartments” sells for $US 2,872 per square foot

June 4, 2015June 6, 2015 dajkgroup Business Consultant, Entrepreneur, finance, investment, investor, net lease, NNN CRE, real estate Business Consultant, business incomes, commercial real estate acquisition, entrepreneur, net lease, Net lease Buyer

Buyers in Hong Kong are snapping up “Mosquito Apartments”—180-square-foot flats in luxury high-rises. These tiny dwellings are selling for more than $500,000 in some areas – Source WSJ

Video-WSJ

Full article WSJ

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Would you spend for “mosquito apartment” or invest in net lease CRE?

What is the monthly net income with the same amount for net lease commercial real estate investment can be collected?

Investment capital amount: $US 2,872/SQFT or $US 516,960
Net lease’s capitalization rate (“CAP”) = 5% or $US 25,848 (annually)
Term: minimum is 5+ years

Therefore, your NNN CRE-USA investment will generate $US 2,154 per month. Please note this is your passive income which will be taxed at lower than your earn income.

Learn more, please visit DAJK Group.

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Currency Exchange update 5/20/15

May 20, 2015May 20, 2015 dajkgroup Business Consultant, business owner, Currency Exchange, Entrepreneur, export_Import, finance, investment, investor, net lease, NNN CRE, real estate Business Consultant, business owner, commercial real estate acquisition, currency exchange, currency rate, entrepreneur, FM Global, FOREX, import export business, investment, investor

Currencies

The USD is slightly stronger against G-10 currencies with the lone exception being the GBP. Among G-10 currencies, the Danish krone and euro show the greatest decline with both lower by about 0.5%. Among emerging market currencies the South African rand, Argentine peso and Turkish lira are all better by nearly 0.3% while a host of currencies are lower with the Russian ruble and Polish zloty off in excess of 1.0%

If we can help you with any Foreign Exchange needs, please do not hesitate to contact us.

Please note a minimum per transaction is $US 100,000

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Our net lease commercial real estate investment is also available for investors who are seeking for an alternative investment secured by real estate, low risk, reasonable yield and provide fixed monthly income.

Real Estate Lenders nationwide…? (residential & commercial)

Investors or Borrowers have challenging credit issue…? Our private real estate lender network may provide funds for your project. If you have a good credit score, our relationship with Wells Fargo bank may provide funds for your project. Please contact us with your inquiry information.

What is an alternative investment real estate versus vacation home…?

May 13, 2015May 13, 2015 dajkgroup Business Consultant, business finance, Entrepreneur, finance, investment, investor, net lease, NNN CRE, real estate Business Consultant, business incomes, business owner, commercial real estate acquisition, Dollar General, entrepreneur, investment, investor

Mortgages on vacation properties have harder terms—and more expensive to own than a primary residence.

Is your vacation home an investment property? Homeowner would need to consider and calculate

Cost of the mortgage
Insurance
Taxes
Maintenance & Repair

Lender’s requirement are higher down payment and at least 50 basis point on the second home comparing with your primary home.

In addition, lender would calculate your debt-to-income (“DTI”) against the borrower when they apply for another mortgage. Under current federal laws, a borrower’s DTI must be 43% or lower to qualify for most mortgages. This DTI percentage measures the borrower’s overall monthly debt payments relative to income—the lower the debt, the better.

In fact, many lender also calculate the vacancy rates, roughly from 25 to 30% of the year.

Borrower may have to research for lender who are non-traditional lenders for the investment-home market who would willing providing 30-year, fixed-rate mortgage specifically developed for landlords who cannot qualify for loans from traditional lenders.

In general these lenders term at higher interest rate and loan-to-value (“LTV”) is approximately 75% the property’s appraised value. Please note the minimum credit score is 650.

The rental income covers mortgage payments and still enjoy the property for some personal use.

Here are some consideration for using a vacation home for rental:

Documentation & Paperwork. Borrowers hoping to qualify for an investment loan can expect lenders to ask for proof of ongoing occupancy, such as a copy of the lease and evidence that a security deposit was collected

Higher taxes. Non-primary residences aren’t eligible for homestead exemptions on local property taxes. Mortgage interest on investment homes isn’t deductible for federal income tax purposes.

States and local municipalities require vacation-property owners to collect and pay the same lodging taxes as hotels and charge stiff penalties to nonpayers.

Maintenance & Repair. Maintenance and insurance costs will have higher rates than homeowner’s policies. Vacation rentals also require cleaning and marketing, which can be handled by a real-estate management company—at an additional cost.

Alternative, net lease commercial real estate (“NNN CRE”) investment is a long term, secured by real estate, low risk, reasonable yield and fixed income. You may not need to factor a maintenance and repair if you know how to select a right net lease property.

Please subscribe for our monthly selection of NNN CRE USA and investment resources.

Also, please sign up for your free consultation if you need further discussion.