How to Calculate NNN Per Square Foot?
How to Calculate NNN Per Square Foot?
Renting a space intended for different purposes does not pose an easy task when you need to choose it. It isn’t easy to find a property that meets all the requirements regarding comfort, location, area, and other parameters. In addition, it must meet financial expectations. And, of course, the price of NNN rent must also be beneficial to the premises owner.
It is necessary to calculate the cost of rent to make sure that the interests of both parties coincide. Correctly count the amount of money it will cost to use the property taken on the NNN lease for a month or a year; it is impossible without knowing what affects such pricing. An essential factor in the calculation is whether the landlord is a private or legal person.
Where to Begin?
Let’s find out how do you calculate NNN per square foot? First, it is worth understanding that regarding the procedure for forming the price for the NNN lease of non-residential premises, there are significant differences. When renting real estate, the lessor determines the cost based on his considerations. At the same time, in the formation of the rent price, he rarely applies the formulas, focusing on assessing the value of the number of rooms, the general level of comfort, and some other factors.
If NNN rents premises not intended for human habitation, in this case, the landlord’s income will depend on how well you can calculate the number of payments for its rent. It is essential to calculate the amount so as not to miss all the factors that significantly affect its value and, at the same time, keep the price competitive because the market for real estate not intended for human habitation is also quite saturated.
What Affects the Amount of Rent NNN
Having an objective figure from which you can start when calculating the amount of favorable rent, you can form the price in more detail. Analyzing as many main parameters as possible will help determine it correctly.
You should also consider that if the apartment for rent is in good condition, the landlord may increase the price by 20-50% compared to the average cost of the previous apartment type. You can also safely count on the opportunity to receive rent payments almost twice as high as the average price, which is distinguished by premium repairs, designer interiors, and branded appliances:
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Suppose the property has been rented out and used for a long time, and the repairs were made long ago. In that case, it is reasonable to lower the rent for objectivity compared to the current statistical average. If legally you can characterize the property as “without repairs, in normal condition,” it is realistic to calculate the price with a 20-30% discount.
Availability of Appliances and Furniture
To correctly calculate the rental value, it is worth remembering that the rental value of a fully furnished and equipped building is half as much as an empty building that lacks the essential appliances. If the space is devoid of only some basic elements, it also negatively affects the rent price and reduces it.
Landscaping and Infrastructure
While calculating the rent amount, one should evaluate the liquidity of the property, which is considerably increased by the availability of large stores, entertainment and shopping centers, and transportation hubs nearby. The development of internal infrastructure positively influences price formation. In this case, we are talking about the presence of:
playgrounds for children;
social and commercial facilities;
underground, guest, covered parking;
passenger and passenger elevators;
storage rooms, strollers.
Fees for NNN rent can be determined the higher, the more elaborate and developed outdoor and indoor infrastructure. Well-developed parks, scenic spots, and embankments nearby also increase the size of the cost. The object next to the vacant lot, industrial area, or highway will lose value.
The Order of Formation of NNN Rental Value
Forming the cost of NNN rent involves considering all the factors that affect both its growth and decline to set it in such amounts to get the expected profit, preserving the competitive attractiveness. You can do this by calculating the final amount by adding to the base amount all the percentages that play into the price increase and subtracting the amounts that make it lower.
How to Calculate the Cost of Renting a Space
Real estate owners can earn a steady income by renting out space. But the first question that arises is how to calculate the rental value of the premises? The landlord must use the formulas established by law to calculate the rate. Only in this way will it be possible to justify the amount of the monthly payment for the tenant. This article will tell you about the methods of calculating the rate and what the calculations depend on.
What Influence the Amount of NNN Rent?
The final amount is affected by several factors:
the purpose of the premises;
the condition of the building and its wear and tear;
the quality of the building materials
type of premises;
location: infrastructure and transport interchanges.
The list includes only the most important values, but other parameters often affect the cost. For example, calculations often consider the additional fee for the land on which the building/premises.
Also, a fundamental criterion is a location, which has passability. It is through passability that price increases. So, for example, the cost of premises in the city center, where the concentration of people is high, will be much higher.
Often calculating real estate is performed per square foot of area. By agreement of both parties may be used other units of calculation. Leasing of buildings and non-residential premises is only possible for legal entities.
How to Calculate
You need to consider how much money goes into maintaining the building and various fees, including utilities. It is usually mentioned as a separate clause in the contract.
It is possible to calculate the amount of the lease of the facility by considering a lot of indicators:
the total area of the premises;
the rate if the property is sublet;
peculiarities of the territory to which the object belongs. Regional legislative documents approve the amount;
the activity performed by the tenant on the premises;
type of non-residential property;
base rent rate, usually calculated per square foot.
We recommend engaging experienced appraisers or commercial real estate brokers for accurate calculations. It will avoid errors in calculations, inaccuracies in documents, and problems with the tenant.
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