Real estate commercial
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Description
At Green Mountain Realty, our brokers continue to be baffled by property "offerings" from other listing brokers with incorrect commercial real estate cap rates. The cap rate is determined by dividing the NOI (net operating income) by the listed price. As a commercial real estate investor can see, it is very important to determine the NOI correctly. In many cases, the commercial real estate cap rates shown are obviously incorrect since the broker shows the property as NNN and then proceeds to indicate some expenses by landlord. Our brokers see cap rates overstated more than 50 of the time.
Stated Commercial Real Estate Cap Rates are Incorrect in many Cases
Our brokers recommend that commercial real estate investors review a detailed list of expenses including a vacancy factor for all tenants, management, accounting fees, taxes, insurance, maintenance and capital reserves. Single tenant commercial real estate NNN properties often show the NOI and cap rates based on the rental income without adjusting the NOI for maintenance of the roof and structure. In addition, capital reserves are rarely shown in the NOI calculations to set aside funds for future replacement of capital items that are probably spelled out in the lease. A NNN tenant rarely is 100 responsible for all capital replacements. It's important to read the lease and adjust the NOI accordingly.
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Real estate commercial
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