what is the legal method of calculating rent on commercial property in south florida?

In Leasing Property - Asked by tariq h. - Apr 21, 2013
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Patrick K.
Cypress, TX

Legal? Never heard a rent calculation/return on investment put in those terms. Rent rates on commercial properties can vary depending on the use. Is it a medical property or a retail property where percentage rent might be possible. Assuming you already own the property take your PI + taxes + insurance + maintenance and total those costs. What kind of return on cost do you think is appropriate for your time risk etc?
7.5%, 8.5% 10% Bump your cost by those amounts and see what that annual rent comes to...divide by the SF and get the annual $ PSF rent. See how that compares to comparable properties in the submarket and adjust accordingly. You can legally charge whatever the market will bear...only the market can tell you what that is.

Apr 22, 2013
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Tom P.
Clearwater, FL

There is no specific "legal" way other than what you define in the lease agreement. However there are several different approaches. The three most common are Triple Net (NNN), Modified Gross (MG) and Gross. Sometimes the nature of the property will determine the method. For example, in a multi-tenant building, all expenses might be quoted in a gross rent, because the suites are not individually metered and space requirements vary from tenant to tenant. There is usually a "base Year" limitation.
On the other hand, a retail space might be quote on a NNN basis where the the tenant pays a base rent plus all expenses. This "pass through amount" is usually calculated on as prorata sf basis, and will generally vary from year to year based on the actual expenses of the Landlord.
There are other ways to determine rent, including the percentage rent method mentioned by Patrick K. Sometimes there can even be a combination such as NNN with a percentage kicker. Get yourself a competent broker and/or attorney to review lease before entering into one.
Below is an interest CCIM article re how different methods of rent calculation can make a big difference.

Apr 25, 2013
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Steve S.
Plainview, NY

There is no legal method. This simply is not a legal issue. As much as the market will bear. Which is as much as an interested party is willing to pay. Plus tenant should be responsible for increase in property costs such as RE tax, insurance, maintenance, any landlord utilities if any. You should know your market rates for your type of property and charge accordingly. Your debt and mortgage payments really do not come into account for what a tenant pays in rent either.

Apr 28, 2013
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