Kolec Nick Ndoja
Business is quite complicated, but separation of business and property starts with the RENT. Rent has to give proper return to Landlord (CAP RATE) and Rent has to be affordable for a tenant and long term options. When you evaluate a business, specialty of the business, goodwill and operator experience are very delicate subjects (i.e not every business has the same market demand, not every operator brings the same results, and costumers loyalty could easy change etc). Exit strategy is always something to consider. As a rule of thumb CAP RATE OR % RETURN ON INVESTMENT VARIES: 1.REAL ESTATE 6%-10%; BUSSINESS OPPORTUNITY 25%-40%.
Some times a % of yearly business sales are added to the base rent.
Bottom line: Everything is done in case by case basis.
Oct 21, 2008