Mother passed and her small (0.6ac) commercial property in south Texas with a WAG value of 1,700,000 transferred to the four siblings. It has been continuously leased to one of several national convenience store chains since 1975 with a current income of $7200/mo through 2031. Has small % increase at end of term with 3 additional 5 year options. To me it seems just better to hold than liquidate, but I have no cash requirements and quick look says unless you get great rate of return on a different investment and inflation goes away the sell upside if any is small.
But this is not my deal, a small check monthly forever would be fine with me.

Gross or net income? Lease type? NNN?

Triple net. The original lessor built the structure, 3 rental units and a small 800ft office my parents used and is currently separately leased. Only expenses are maintenance and taxes on the 800ft section.

Length of the term is nice but you're going to likely be way behind market by the end of that term. If it was annual escalators that would be diff.

Cap rate isn't great.

We just sold a small warehouse property in Midland for $1.6M and we were getting $11k+/month NNN.

We have a property in Weatherford right now valued at about $3.8M and a $33k/month NNN lease.

I think if it were me I would keep the property and see what my options are renegotiating the lease (and probably still hold on to it if there was no option to renegotiate).

Sellers, in general, on properties like this are only selling if they have to. Not your situation here, I would hold. Because of interest rates both CAP rates are really compressed and DCRs are very challenging to get where they need to be and/or require 45% equity, if not more, on top of that to get them there.

I wouldn't sell if it were mine but I also would have to contend with siblings. I hope y'all get along.

I'd feel the siblings out but vote sale. If the other three wanted to keep id tell them to get a loan against the property and buy me out.

How is it being transferred to you? Is there some sort of lady bird deed, probate/executor, trust, LLC?

And four is only slightly worse than two. Two people want A and two people want B, you're at an impasse.

Its on 10th street in McAllen doubtful it will dry up. Major NS route for over a century.

Probate to trust currently.

Win At Life said:

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Well, my calculator says you're making 5% on your $1.7MM value, if that helps you make any decisions.

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This...if your numbers are correct, why would you hold it? Only reason to hold it would be if you could use it as leverage to invest more. Especially with 3 additional sibling partners.

That's only looking at cash flow and ignoring asset appreciation, right?

that is if you can acquire something that yields 8%.

It doesn't have to yield 8% (the property is yielding less than 5, so yield plus growth). Regardless, if you are going to sit on an asset for 10+ years, I don't think that's difficult. Muni bonds are yielding over 5% right now, tax free.

What muni bonds and duration are yielding 5% tax free?

kyle field 94 said:

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What muni bonds and duration are yielding 5% tax free?

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I assume you are asking for maturity not duration. There are many of these available right now maturing from 1-30 years maturity.

gigemhilo said:

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Slightly different thought, but...

You have a stepped up basis in this property. Sell it now and you get 1.7 mil (divided) tax free.

in other words, you could liquidate the property tax free, invest the proceeds, and still get your "check" for the rest of your life.

Just a thought.

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Especially since this is somewhere in South Texas. That could mean the town goes bust or the lessee is the only player for the space so if they decide not to execute the options, it's worth little to nothing.

And what happens when the property has major maintenance needs or renovation needs to lease it again?

I hate the idea of selling something that has been passed down, but if none of the 4 have experience or a plan for capital if needed, seel it ASAP.