Triple Net Analysis: How to calculate expense

[Gregory Schwartz]

Question for you all concerning the analysis of a triple net property.

I'm working with a client who's interested in a 6,000SF office space set up for medical spaces. I've researched average per sqft rent (16.50 / SF / year) and I can run mortgage calculators no problem. Where I struggle is estimating expenses. With a triple net lease, I understand that the tenant pays tax, insurance, and maintenance. Sooo what does the landlord have to account for?

To help me out let's assume gross income is 100k / yr and a 4 CAP. What can I expect the expenses to be? (from there I can calculate NOI and property value)

Thanks in advance! 

[Josh Ridpath]

The calculation for calculating NOI for a NNN leased property is a follows:

Rental Income

+ Reimbursement Income (Tenant reimbursing the landlord for operating expenses)

= Subtotal

- Vacancy/Collection Loss (% Applied to the subtotal)

= Effective Gross Income

- Real estate taxes (Typically reimbursed in a NNN lease)

- Insurance (Typically reimbursed in a NNN lease)

- Maintenance (This will depend on if single-tenant building or multi)

- Utilities (Could be nothing is single-tenant building)

- Management Fees (Typically reimbursed in a NNN lease)

- General/Admin Expenses (Typically reimbursed in a NNN lease)

- Reserve for replacement (Tenants do not typically reimburse for this)

= NOI

NOI/Cap Rate = Market Value