Expense Ratios for Office and Industrial Properties

3 Replies

Hey there seasoned commercial investors. I'm looking at a few industrial and office buildings that look very interesting but the owner doesn't have much in the way of a P&L. There's the old 50% rule for apartments, which is a decent rule of thumb. What do you use for a general rule of thumb on expense ratios for office and industrial buildings; either on a triple net lease or if the owner pays taxes and insurance. Thanks!

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Hi Andrew,

I use 9% of gross rents to figure taxes, 3% for insurance. If NNN is still in place I would leave utility & other expenses out. I consider a 5-10% vacancy rate depending on your market. 3% for reserves. Divide annual income by proposed annual debt and expenses and hope for $1.25 of income per $1 of debt. A bit conservative, but that's how I like to be.