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Back-of-the-napkin commercial real estate underwriting, in seconds.
5 Second Model · back-of-the-napkin underwriting
NNN Acquisition
Single tenant, net lease. Buy the income, ride the bumps, sell it to the next guy.
A triple net deal is a bond with a roof, and the two things that decide the outcome are the rent escalations and where the cap rate sits when you sell. This model prices the property off a going-in cap, applies bumps on whatever schedule the lease actually uses, sizes debt with an optional interest-only period, and exits at a cap rate you choose. It tracks lease term remaining at sale, because a buyer prices the years left on the lease rather than your going-in cap.
Levered IRR / Equity multiple
--
Equity out at close, then rent, then the sale
What you are buying
| Purchase price at the going-in cap | -- |
| Buy-side broker fee | -- |
| Closing costs and diligence | -- |
| All-in basis | -- |
| Loan proceeds | -- |
| Loan fee | -- |
| Equity required | -- |
| Effective going-in yield on basis | -- |
Sources and uses
Deal metrics
Yield by year
Return on total cost as the deal stabilizes, against the cap rate you exit at
The income
| Year-one rent | -- |
| Rent in the final year | -- |
| Year-one debt service | -- |
| Year-one DSCR | -- |
| Year-one cash-on-cash | -- |
| Average cash-on-cash over the hold | -- |
The exit
| Forward NOI at sale | -- |
| Lease term remaining at sale | -- |
| Going-in cap vs exit cap | -- |
| Gross sale price | -- |
| Sell-side broker fee and closing | -- |
| Loan payoff | -- |
| Net proceeds to you | -- |
| Total profit over the hold | -- |
| Net present value | -- |
Debt service coverage by year
Amortization schedule
Return sensitivity
Levered IRR across going-in and exit cap rates. Your case is outlined.
Scenario analysis
Each column is the whole model re-run, not an adjustment to the base case.
What moves the return most
Points of IRR between the low and high case for each driver, ranked
Where this deal breaks
Solved against your own discount rate. Everything else held at your assumptions.
Common questions
- What happens if the exit cap is higher than the going-in cap?
- You give back years of rent bumps. On a flat-rent lease with no escalations, every basis point of cap expansion comes straight out of your equity.
- How much lease term should be left when I sell?
- Under about five years and a buyer is underwriting a re-tenanting rather than an income stream, which prices materially wider. Model your hold against the lease, not just the market.
- Are triple net leases really zero landlord cost?
- Rarely entirely. Roof and structure are often carved out, and reassessment on sale can hit the tenant hard enough to matter at renewal. The leakage input exists for this.