All Forum Posts by: Samuel Webb

I am looking for some assistance in calculating the NOI fo a triple net leased commercial property. The details: -Property is being leased as a bar/restaurant in Thornton, CO - My LLC owns the property. I also operate the bar/restaurant. In effect, I own the location. - Bar pays for taxes, maintenance, insurance and rent - same tenant since 2001 Is the NOI just the monthly rent x 12, minus miscellaneous accounting expenses? What would be a good way to find the cap rate for similar properties in my area? What factors am I missing? Is the NOI of the bar/restaurant relevant to this valuation? Thanks for any help, I’m new at this type of analysis. Please let me know what variables I am missing, or should be considered in general in these situations. Sam

@Mike Hoefling I have experience with this in Denver. A building my dad owns in the RiNo district (think hip, up and coming neighborhood). Rent was $1400/month when the building was used as a towing company. Was leased to a dispensary next. Ended up at $5k/month. They want to extend now for over $6k. So I know there is a premium build in because the possible locations are limited by law (can’t be close to schools etc,). But part of it was also due to the location emerging. The idea of a partnership was explored, but our lawyer advised against it. Said it could put the property in jeopardy if there was any criminal behavior Since it’s still illegal on a federal level, not worth the risk. I’d say feel them out, count on a premium, but also get solid legal counsel. Due to the high cost to renovate a building to comply with laws, you might end up in a similar situation as my dad: with a property that cash flows at a ridiculous percentage, with tenants who have lots of incentives to stay put. I’m interested how it works out. Good luck!

@Kourtne Stancil I am definitely looking for deals in Denver area. Mostly looking in Thornton /Northglenn. 80241,80233,80260. Let me know if you come across sfh in that area.

Right... if it is gutted. My question is if it is possible to do without fully gutting. The reports show the contamination is mostly isolated to the garage and one room adjacent. On the one hand, safety is paramount. Also, the state has to sign off on the finished product being free of contamination. For all I know, I either have to gut everything, or just an area. And what about vents, I’m sure the fumes travel through. Would they need replaced? I think I’m hoping for a referral to someone who has dealt with this, like a contractor, to give me a better scope of options.

@Alexander Gruber I am also in Denver. What I’ve found for the area, as well as coastal markets is that the 2% rule isnt attainable. Even in the south and Midwest, it is difficult. Most of the properties I’ve looked at in other areas near 2% were in really bad parts of town... after all, there is a reason why an investor would be potentially rewarded with higher return. They are taking a higher risk. If your numbers work out at 1% in Denver, you are doing well. I’d say .8% is probably a more accurate benchmark. Some markets are not as attractive as others for rental properties. When homes appreciate dramatically, rents lag behind, comparatively speaking. This makes finding rentals harder, but the properties have appreciated more. Don’t be discouraged, deals are out there. 2% probably won’t happen in this area (if it does, make sure you aren’t missing something). Good luck!

I am looking at a house that has been severely discounted due to contamination from meth. I have access to the report, the seller has been up front about it. My question is does anyone know how to go about estimating the costs to remove the contamination? Are there companies that specialize in this? It is obviously difficult to put together an analysis without knowing costs, or even how to find someone who would know. The house is in Colorado. Any advise, or previous experiences would be greatly appreciated. Thanks Sam