ROADMAP · INCOME ASSET
Income property with a tenant
The investment is not the advertised rent; it is sustainable cash flow supported by the lease, receipts, permitted activity and owner costs.
Who it fits
For investors seeking current income who assess the tenant and lease alongside the premises.
When to reject it
Reject it when cash flow only exists on paper, activity is unconfirmed, security is weak or vacancy breaks the case.
Value-creation logic
Value depends on net flow, tenant and lease quality, and the ability to re-let the premises.
Starting inputs
- Net income after every owner cost
- Lease term and conditions
- Payment record and tenant security
- Vacancy and adaptation case
Documents at the decision gates
| Contract topic | What to check | Decision |
|---|---|---|
| Term and exit | Lease and amendments | When and how income can stop |
| Security | Deposit, guarantees and expiry | Who covers default and how |
| Indexation and incentives | Review terms, rent-free periods and discounts | Rent actually due each month |
| Costs and CAPEX | Allocation, invoices and inspection | Owner-funded obligations |
| Receipts | Rent roll against statements for the same period | Arrears, one-off payments or discrepancies |
Check the commercial lease and its agreed terms against LAU article 4 and title III. Do not automatically apply permanent-home rules.
Educational rent-to-cash-flow bridge
For an assumed 12 months: contracted rent €60,000 − vacancy loss €6,000 − owner operating costs €9,000 = NOI €45,000. Debt service of €12,000 and capital works of €8,000 then leave cash flow of €25,000 before profit tax. These are assumptions, not a DNPI asset or yield. This NOI excludes debt, CAPEX and profit tax; reconcile any other reporting convention separately. A tenant deposit is not earned rent.
One extra empty month reduces assumed income by another €5,000 before re-letting and fit-out costs. Tenant review and the full budget complete the model.
A shared nine-stage process
Objective and capital framework
- Decision
- Decision: define target cash flow, reserve and acceptable vacancy.
- Evidence
- Evidence: documented inputs and review conclusions for target cash flow, reserve and acceptable vacancy.
- Risk
- Key risk: committing before the assumptions for target cash flow, reserve and acceptable vacancy are tested.
- Control gate
- GO/STOP: proceed only when the inputs and owner for target cash flow, reserve and acceptable vacancy are confirmed.
Investment thesis
- Decision
- Decision: define sustainable net income supported by a verified lease.
- Evidence
- Evidence: documented inputs and review conclusions for sustainable net income supported by a verified lease.
- Risk
- Key risk: committing before the assumptions for sustainable net income supported by a verified lease are tested.
- Control gate
- GO/STOP: proceed only when the inputs and owner for sustainable net income supported by a verified lease are confirmed.
Search and first filter
- Decision
- Decision: define location, permitted activity and tenant demand.
- Evidence
- Evidence: documented inputs and review conclusions for location, permitted activity and tenant demand.
- Risk
- Key risk: committing before the assumptions for location, permitted activity and tenant demand are tested.
- Control gate
- GO/STOP: proceed only when the inputs and owner for location, permitted activity and tenant demand are confirmed.
Preliminary economics
- Decision
- Decision: define net cash flow after owner costs and vacancy.
- Evidence
- Evidence: documented inputs and review conclusions for net cash flow after owner costs and vacancy.
- Risk
- Key risk: committing before the assumptions for net cash flow after owner costs and vacancy are tested.
- Control gate
- GO/STOP: proceed only when the inputs and owner for net cash flow after owner costs and vacancy are confirmed.
Legal and technical review
- Decision
- Decision: define title, licence, lease, receipts and premises condition.
- Evidence
- Evidence: documented inputs and review conclusions for title, licence, lease, receipts and premises condition.
- Risk
- Key risk: committing before the assumptions for title, licence, lease, receipts and premises condition are tested.
- Control gate
- GO/STOP: proceed only when the inputs and owner for title, licence, lease, receipts and premises condition are confirmed.
Structure and acquisition
- Decision
- Decision: define purchase terms, tenant security and risk allocation.
- Evidence
- Evidence: documented inputs and review conclusions for purchase terms, tenant security and risk allocation.
- Risk
- Key risk: committing before the assumptions for purchase terms, tenant security and risk allocation are tested.
- Control gate
- GO/STOP: proceed only when the inputs and owner for purchase terms, tenant security and risk allocation are confirmed.
Strategy delivery
- Decision
- Decision: define technical corrections and lease stabilisation.
- Evidence
- Evidence: documented inputs and review conclusions for technical corrections and lease stabilisation.
- Risk
- Key risk: committing before the assumptions for technical corrections and lease stabilisation are tested.
- Control gate
- GO/STOP: proceed only when the inputs and owner for technical corrections and lease stabilisation are confirmed.
Control and reporting
- Decision
- Decision: define receipts, costs, covenants and lease events.
- Evidence
- Evidence: documented inputs and review conclusions for receipts, costs, covenants and lease events.
- Risk
- Key risk: committing before the assumptions for receipts, costs, covenants and lease events are tested.
- Control gate
- GO/STOP: proceed only when the inputs and owner for receipts, costs, covenants and lease events are confirmed.
Stabilisation and exit
- Decision
- Decision: define hold, replace the tenant or sell a stabilised asset.
- Evidence
- Evidence: documented inputs and review conclusions for hold, replace the tenant or sell a stabilised asset.
- Risk
- Key risk: committing before the assumptions for hold, replace the tenant or sell a stabilised asset are tested.
- Control gate
- GO/STOP: proceed only when the inputs and owner for hold, replace the tenant or sell a stabilised asset are confirmed.
Review scenarios
Base case
The tenant performs, costs match the evidence and the permitted use remains valid.
Downside case
Test default, legal costs, vacancy, adaptation works and a new rent level.
Frequently asked questions
Is the lease alone enough?
No. Review addenda, receipts, security, permitted activity and the allocation of costs.
How should return be calculated?
Use net cash flow after owner costs, vacancy and required investment, not advertised rent.
What is a STOP gate?
Unverified receipts, incompatible use, weak security or an unacceptable vacancy case.
