Page 103 - Trump University Commercial Real Estate 101

Ho w to Read a Deal

tenant.) There are six other retail stores in the complex. The square
footage and rent breakdown is as follows:

Leases Sq. Ft. Rent per Sq. Ft. Yearly Rent
Grocery store 11,000 $ 12 $ 132,000
Pharmacy 8,000 $ 11 $ 88,000
Shoe store 5,000 $ 8 $ 40,000
Nutrition store 2,000 $ 6 $ 12,000
Clothing store 8,000 $ 8 $ 64,000
Electronics store 7,000 $ 7 $ 49,000
Hair salon 2,000 $ 6 $ 12,000
Pizza parlor 2,000 $ 6 $ 12,000
Total 45,000 $ 409,000

All leases are triple - net, with tenants also paying the common - area
maintenance expenses , or CAM, of $ 3,500 per month.
The purchase price is $ 5 million. You and your partners would put
20 percent down and take out an interest - only loan at 6.5 percent.
We already know the NOI for this property is $ 409,000, because
tenants pay expenses under the triple - net leases, and the owner bills
back the CAM expenses. We also know that:

Capitalization Rate NOI / Purchase Price

$ 409,000 N OI

.081 Cap Rate ______________________

$ 5,000,000 Purchase Price
In other words, it is an 8.1 cap rate.
Now let ’ s determine the Cash - on - Cash Return:
NOI – Debt Service

Cash - on - Cash Return __________________

Acquisition Costs

$ 4,000,000 Mortgage Amount $ 5,000,000 Purchase Price .80

Financing
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