How do I determine value for a NNN Lease property with no income?

I'm working on an appeal for a property owner that has just acquired a NNN Lease for his restaurant that has been vacant for two years. The property owner wants me to do the income approach and the only information he has given me is the monthly lease amount of $10,250 and he wants it capped at 10% (based on information he obtained from LoopNet)? I have worked the cost approach on this one, but he is insisting the income approach?
In Leasing Property - Asked by Jon B. - May 19, 2010
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Gregory G.
San Francisco, CA

I will work with you on it if he is realistic.
Gregory Garver
Brokers USA Commercial
1160 Mission Street
Suite 812
San Francisco, CA 94103
Cell (415) 968-6065
Fax (415) 520-6589

May 19, 2010
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Jordan K.
Denver, CO

$10,250 x 12 mos = $123,000 net income
No expenses because it is a NNN lease, so take the $123,000 annual rent (net income) and divide 10%.
$123,000/.10 = $1,230,000

May 19, 2010
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Michael W.
Surprise, AZ

Develop an estimate of the market rent from comparable rentals and base your income approach estimate off of the market rents. Also develop a cap rate based on the market area, not what the owner tells you. It is possible that 10% is reasonable for restaurants in this area, but you should know for sure. Notate that the owner has given you a lease and the lease amount and reconcile that with the market data. Also, verify that it is a legitimate lease (signed by both parties, etc.).

May 25, 2010
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