Educate a newbie please

[Ken Thakar]

What is true NOI while investing in NNN property? How to calculate COC for NNN property?

[Jeff Kehl]

@Ken Thakar if the property is truly NNN meaning the owner is not responsible for any costs, your NOI is whatever annual lease payment the tenant is paying you. Most NNN properties I get sent say that right in the offering memorandum. So for instance a dollar store being offered for $1,000,000 at a 6 cap NNN is paying $60k per year.

Your COC return depends on how much of that money your borrow. If you put down $1,000,000 cash then your COC return is exactly the same as your cap rate, 6%.

What if you borrow 75% of the price for 20 years at 5% and put down $250k? Well then your monthly mortgage payment is $4950 and you get a rent payment of $5000 ($60k/12) so you cashflow $50 a month or $600/year.

Your COC return on that is $600/$250,000 or .2 %.