I am looking for some assistance in calculating the NOI fo a triple net leased commercial property. The details:
-Property is being leased as a bar/restaurant in Thornton, CO
- My LLC owns the property. I also operate the bar/restaurant. In effect, I own the location.
- Bar pays for taxes, maintenance, insurance and rent
- same tenant since 2001
Is the NOI just the monthly rent x 12, minus miscellaneous accounting expenses? What would be a good way to find the cap rate for similar properties in my area? What factors am I missing? Is the NOI of the bar/restaurant relevant to this valuation?
Thanks for any help, I’m new at this type of analysis. Please let me know what variables I am missing, or should be considered in general in these situations.
Sam
@Samuel Webb
Unless I am mistaken, NOI is a very simple equation. ALL of the income minus ALL (except debt service) of the expenses. You don't use debt service, so you can refinance at a different rate at any time without affecting NOI. Cap Rate is NOI divided by Sales Price. I'm sure somebody will slap me if that's wrong.
@Samuel Webb hopefully you have found the answer to this by now, as Alvin was correct.
To find NOI, work in annual numbers.
Start with your potential rental income for the year + any additional income (fees, vending machines..etc) For residential units, always account for tenant vacancy. Subtract about 5% of rental income. This will give you your Effective Gross Income.
From your EGI, subtract operating expenses incurred through operation of the building, not the business. (So no business advertising costs, business supplies...etc. )
This will give you your net operating income. (If you accidentally subtract the mortgage in this calculation, you will have calculated your Cash Throw off. )