What guidelines should be used to calculate rent for a triple net lease that is up for renewal.

Property consist of 35 acres and the tenant operates a dirt track/speedway and a landscape business. The property value is approximately $215,000. Since this is the only race track in the area, it is hard to compare similar land to determine the market value. It has been in operation for 88 years and well established. We want to be as fair as possible in calculating the rent. Not sure what guidelines we should use. Any suggestions?
In Leasing Property - Asked by G. P. - Jan 19, 2011
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Answer(s)

sue p.
Owner/Investor
Edgewater, FL

One quick way is that since it is triple net, your income is only on the interest you want to earn on the value of the property. The tenant would understand a 5% per year increase.

Jan 19, 2011
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Jacqueline S.
Broker/Agent
Alexandria, VA

35 acres divide by 215,000

Jan 21, 2011
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Rob B.
Chandler, AZ

G.P........ I am not sure I understood that either of the two previous answers were correct for your question. How much do you want to earn on your money? If you are satisfied that 8% is a fair figure compared to other uses of the money, then your rent needed is $17,200 annually, or $1,433 per month. (Derived by applying an 8% cap rate to $215,000 of value). With regard to another condition in the lease, as Sue P pointed out, you should likely have a COL increase annually. My suggestion is that this could range from a minimum 4% to a maximum 7%, which is entirely negotiable in with between you and your tenant. The question is, how much value will this year's rent lose through the region's inflation? There are other ways to price the annual increases, but your renewal rent should be calculated on an acceptable cap rate for you and along with an acceptable rental amount for the tenant. Good luck G.P.............Rob Baird, CA RE License #544165 (One of the oldest, active licenses in CA) 951 515-5855 Email: rob@capratecommercial.com

Jan 21, 2011
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