An Introduction To NNN Investing
Retail Categories
The Investment
Types of Sellers
The Buying Process
Market Analysis
Highest and Best Use Explained
Location and Site Analysis
Financial Feasibility
Industry Trends
Due Diligence
Financing
Low Risks of Default
Sample Lease Agreement
Sample Letter of Intent
Sample Commercial Inspection Report
Financial Feasibility
Financial feasibility is the final step in the market analysis model. Market analysis establishes the supply and demand picture to allow a reasonable market share. Location/site analysis answers the physical and demographic aspects of a site. Financial feasibility will answer the question of whether the investment allows for a reasonable profit commensurate with the risks involved.
From a user prospective, the user tries to maximize the profit to its business. To be financially feasible the site will need to be purchased or developed at a cost that will not exceed a company’s budget. Most retailers use a percentage of sales as a way to judge occupancy costs or rent.
Land costs must be within limits of current market comparable and development costs need to allow for a final occupancy costs that fits their percentage of sales target.
As an investor seeking to purchase income-producing real estate, the purchase price, loan points, closing costs, appraisals surveys and other miscellaneous cost need to be summarized. Holding costs should be known. Finally, on disposition, sale proceeds need to be adjusted for commissions paid, legal costs, loan penalties and other closing costs that must be paid from sale proceeds.