Yesterday, we covered Step 2 of the Investment Property Valuation Calculator (IPV), where investors examined the income of their commercial properties. Today, we’ll cover Step 3 of the Investment Property Valuation Calculator, where you’ll lay out what your buildings are costing you to maintain and own.
In Step 3, you’ll break down the expenses it takes to run and maintain your property. This will provide you with a better idea of how much each charge is cutting into your profit and where you could potentially save money.
There are typically two types of leases when dealing with commercial real estate, Gross Lease and Triple Net Lease (NNN). If a Triple Net Lease has been signed, the tenant agrees to take on the full extent of the building’s expenses. They will cover taxes, insurance, maintenance and nearly every billable item.
With a Gross Lease, it is the landlord who is responsible for paying the majority of the building’s expenses. The tenants pay a singular rate throughout the year.
Click here to learn more about the two types of leases.
As with income, we recommend you fill in as many details as possible for your building’s expenses. Every expense you input will lead to a more comprehensive view of your property and allow you to more strategically outline your future plans for it.
The IPV Calculator automatically creates fields for some of the most common expenses, but you are free to create delete or create your own depending on your property’s unique needs.
If you are unsure of your property’s various expenses, there is the option to enter the total lump sum of your building’s cost. This will result in a less detailed, but still functional final report.
When you’ve entered all the expenses you know, hit “Go to next step” to continue valuing your property.
Come back tomorrow when we detail Step 4 of the Investment Property Valuation Calculator!