cssinclair asked:
I am looking to find a formula to value a warehouse for sale. It’s offered at $285 a SF and is vacant. What rent would I have to receive to justify this price assuming a triple net lease.
Is there a formula to calculate the triple net.
I am looking to find a formula to value a warehouse for sale. It’s offered at $285 a SF and is vacant. What rent would I have to receive to justify this price assuming a triple net lease.
Is there a formula to calculate the triple net.
The property is located in California
August 14th, 2009 at 11:41 pm
the answer is too complicated for a generic formula
What is the highest and best use of the property?
You can look on Loopnet.com and try to find similar properties.
There are so many factors that could possibly affect the price
You really need to enlist the help of a proffesional or suffer from leaving too much money on the table or not selling it at all.
August 16th, 2009 at 3:27 pm
There is no formula for calculating tripple net leases. The landlord receives the rent, the tenant is required to pay taxes, insurance and common area maintenance.
As to value, you can use a capitalization method. If you expect to receive a 10% return (and this is what properties of this type in this market are worth) then the annual rent you would expect to receive would be $28.50 per square foot, per year. ($285 x 10% = $28.50). Similarly, for a 9% return rents would need to be $25.65 ($285 x .09 = $25.65).
You need to know what rental rates for similar properties in the area are and what return rates (sometines called capitalization rates) are to determine if the property is worth $285/SF. Remember to allow for vacancy in your calculations.