Posted by Mike on January 05, 2006 at 16:13:11:
Anyone can comment =)
CASH FLOW on NN and NNN leased properties? HELP! - Posted by Mike
Posted by Mike on December 31, 2005 at 14:22:16:
Right now i have 19 apt units and the cash flow is about $3200 a month. I would classify them as C properties.
Just was wondering what type of cash flow you all receive from your commercial investments? Im assuming the cash flow is a lot less with a NNN as opposed to a NN property?
Any response will be greatly appreciated! Thanks and Happy New Year!
Re: Returns - Posted by ray@lcorn
Posted by ray@lcorn on January 06, 2006 at 12:48:49:
Mike,
The only way to answer your question is to make some significant assumptions about your property that may or may not be correct, or even close. Add to that confusion, you’re asking about the difference between NNN and NN, which depends on many other factors, such as tenant credit, building size and location. That’s why no one responded.
For instance, I’ve got a NNN that cash flows over $7T per month after debt payments, but that’s meaningless unless you also know how much debt it has and on what terms, and the current value.
The relevant measure for comparing your current property to a new deal of any kind is the current Return on Equity (RoE).
To calculate the equity, estimate the current value of the 19 units, then subtract the debt amount.
To calculate the return, divide the pre-tax cash flow (NOI - Debt payments) by the Equity amount.
For example, say the 19 units are worth $40T per unit (just as an example). That’s $760,000. Say you owe $400T. The equity is $360T (760,000 - 400,000 = 360,000).
Now, assuming your $3,200 per month cash flow is after debt payments and pre-tax, your return on equity is about 10.7% (3,200 x 12 = $38,400 / $360,000 = 10.66%)
That number may not even be close to the reality, but if it is then I can tell you NNN’s are available for comparable returns, but that doesn’t really help does it? And the difference between a NNN and a NN is even more difficult to talk about without having the specifics. See what I mean?
Glad to have you here, but you’ll have to be more specific.
ray