I agree with Bill's answer and would add the length of the lease may make a difference. What is the lease term? Depending on the length of the lease I'd either increase or decrease the NOI deduction for investment risk. You should make some adjustment depending on a long or short lease term. The longer the lease term the less of a rent factor. The object is to recapture the investment and to make some return on the investment. If the lease term is 10 years you not only have to recoup the investment in just 10 years, but make a return and add a point or two to the CAP rate for risk of vacancy, etc.
Jan 25, 2013