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I do real estate sales, leasing and consulting.

We must agree to disagree. I use the same procedure on 25,000 sf office buildings as I do my res duplex. All you have to do is research.

I didn't read every word of this but I didn't see anyone explain what a NNN lease is. A NNN (a.k.a. triple net or absolute net) lease is one in which the tenant(s) pay their proportionate share of common area maintenance, taxes and insurance... here's the key... as defined in the lease. There is not one definition for a net lease. Be sure to read the lease very very carefully to ensure that it is made clear who is responsible for which expenses.

I've also noticed problems in the past with certain items not being addressed at all, example: If the roof leaks, who's responsible... you think you know, but prove it when there's a bill to pay. Basically, get an attorney to write/review the lease.

Don't take short cuts on real estate analysis. You should do something more comprehensive than using a gross rent multiplier or estimating expenses.

I can help if you want to do a more comprehensive analysis or if you want to send one you have completed for a second opinion.

My contact information is on my site.

Once you understand how to calculate a cap rate (NOI/Purchase price) then you need to understand the purpose of a cap rate.

A cap rate is a snap shot view of the anticipated first year performance of the property regardless of financing and tax implecations.

It is only one method for determining the value of a stabilized investment. It is not a good tool for measuring a value adding investment or an underperforming investment.

When completing a pro forma I use a cap rate for acquisition and one for disposition. Ultimately it is only step 2 of about 5 for determing if an investment is feasible. Let me know if you have detailed questions on a specific investment.

First, I agree with a target of 15% to 20% annualized return for value add properties is a good minimum target for real estate.

Two thoughts on the apartments:

A lot of apartments have been purchased on pro forma for converting to condos where they assume a purchase of $100,000, add some for condo-ing and fix up, then sell for $150,000 or more.

Or, If it's an institutional buyer with all cash, a stable 4% or 5% cap rate with possible increase may work to make sure they have some residential in their portfolio mix.

If I missed your question let me know.

These are accurate and good for a first look in determining the feasibility of a property. I highly suggest a more comprehensive study when calculating the overall investment including an IRR calculation.

This allows you to combine all the cash flows including acquisition, operation, income, expense, taxes and disposition. It all boils down to one number shown as an annualized percentage that can actually be compared to an alternative investment like a CD or Stock performance.

Contact me directly through my website if you want detailed information.

The best way to analyze real estate cash flow is to complete an APOD (Annual Property Operating Data) worksheet, including all cash flows and tax implecations (taxing & depreciation/cost recovery) to determine the before and after tax ownership benefit (or loss).

This is only the first step in analyzing a property's performance. Some really great investments start with average or poor cash flow. The question is: Is the future cash flow high enough to counter act today's lower cash flow and by how much and at what opportunity cost? Using an NPV (net present value) or IRR (internal rate of return) calculation you can determine this.

You can learn this on your own or have someone do it for you... (see below)

Hi, I'm Andrew and I am in commercial re brokerage and consulting. Look forward to developing new relationships.