One of the most powerful advantages of NNN (Triple Net) investments is predictable income. But if you’re holding a property for 10 years, you’re not just buying today’s cash flow — you’re buying a decade of future income.

That means understanding how your Net Operating Income (NOI) will grow over time is essential to evaluating the real return on your capital.

In this article, we’ll break down how to:

• Accurately forecast NOI growth over a 10-year hold period

• Evaluate which leases produce true income appreciation

• Identify the best NNN tenants for long-term blended income growth

If you’re serious about building wealth with NNN real estate, this is the analysis that separates good deals from great ones.

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🔹 What Is NOI?

Net Operating Income (NOI) is your property’s total rental income minus operating expenses — in NNN deals, this is often just the rent, since the tenant covers:

• Property taxes

• Insurance

• Maintenance

So, for most net lease deals, NOI = Base Rent, unless you’re responsible for roof or structural costs.

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🔹 Why NOI Growth Matters Over 10 Years

Many investors focus only on Year 1 Cap Rate, but here’s the truth:

What you earn in Year 10 often matters more than what you earn in Year 1.

Why?

• Inflation erodes the value of flat rents

• NOI growth compounds your total return

• Higher NOI = higher resale value (based on cap rate exit)

• Lenders favor rising cash flow for refinance options

Put simply, NOI growth is how your investment fights inflation and builds wealth.

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🔹 How to Forecast NOI Growth: The Formula

Here’s a simple 4-step approach to forecasting NOI growth over a 10-year hold:

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✅ Step 1: Start with Year 1 NOI

Let’s say:

• Purchase Price: $2,500,000

• Cap Rate: 5.50%

• Year 1 NOI: $137,500

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✅ Step 2: Apply Lease Escalations

Check your lease for rent increases. Common escalation structures:

If this Starbucks has 10% bumps every 5 years, then:

• Year 1–5 NOI: $137,500

• Year 6–10 NOI: $151,250

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✅ Step 3: Calculate 10-Year Total NOI

Add up:

• Years 1–5: $137,500 × 5 = $687,500

• Years 6–10: $151,250 × 5 = $756,250

• Total 10-Year NOI = $1,443,750

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✅ Step 4: Estimate Reversion (Exit Value)

Assuming you sell the property in Year 10 at a 5.75% Cap Rate:

• Year 11 NOI = $151,250

• Estimated Sale Price = $151,250 ÷ 0.0575 = $2,630,435

Now combine the 10-year NOI + resale:

• Total Cash Flow + Exit Value = $4,074,185

Compare that to your $2.5M basis — and now you’re looking at a total return picture, not just Year 1 yield.

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🔹 Real-World Example: Starbucks NNN vs. Dollar General

Let’s compare two NNN deals, both priced at $2,500,000:

🟢 Starbucks – 10% bumps every 5 years

• Year 1 NOI: $137,500

• Year 6 NOI: $151,250

• Blended Cap Rate: ~5.75%

• Total 10-Year NOI: $1,443,750

🔴 Dollar General – Flat 15-year lease

• Year 1 NOI: $137,500

• Year 10 NOI: $137,500

• Blended Cap Rate: 5.50%

• Total 10-Year NOI: $1,375,000

That’s a $68,750 difference — plus the Starbucks will sell for more based on higher exit NOI.

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🔹 Best NNN Tenants for 10-Year NOI Growth

Some tenants consistently offer rent escalations that produce superior blended returns and strong 10-year projections. Here’s who to target:

🟢 Starbucks

• Escalations: 10% every 5 years

• Term: 10–15 years

• Highlights: Corporate-backed, urban and suburban locations, excellent exit liquidity

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🟢 Taco Bell (Franchisee or Corporate)

• Escalations: 7%–10% every 5 years

• Term: 10–20 years

• Highlights: Strong operator network, resilient sales, great 1031 replacement

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🟢 7-Eleven

• Escalations: 10% every 5 years or CPI

• Term: 10–15 years

• Highlights: Essential retail, national brand, recession-resistant

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🟢 Jiffy Lube

• Escalations: 8%–12% every 5 years

• Term: 10+ years

• Highlights: Auto sector strength, often Absolute NNN, high retention

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🟢 DaVita Dialysis

• Escalations: CPI-based or 2% annually

• Term: 10–12 years

• Highlights: Medical tenant, great blend of security and rental growth

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🔴 Watchlist: Flat-Lease Tenants

Tenants with no rent increases require careful underwriting:

These are not bad investments, but they do not scale well over 10+ years unless the initial cap rate is significantly higher.

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🔹 Quick Rule of Thumb: NOI Growth Adds Exit Value

Let’s say two properties are identical in location and tenant quality. But one has 2% annual bumps and the other has flat rent. After 10 years, that 2% growth adds over 20% in additional NOI — and that could translate to $300K–$500K more in resale value depending on the cap rate.

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FAQ – Forecasting NOI in NNN Real Estate

Q1: What’s the difference between Cap Rate and Blended Cap Rate?

• Cap Rate = Year 1 NOI ÷ Purchase Price

• Blended Cap Rate = Average NOI over hold period ÷ Purchase Price
  Blended gives a more accurate view of your return if the lease includes rent increases.

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Q2: What if the lease has CPI-based escalations?

That’s a good thing — it tracks inflation. For forecasting, assume:

• 2%–3% annual growth based on recent CPI averages

• Model it conservatively (e.g., 2.25%) to stress test your returns

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Q3: Should I avoid flat leases altogether?

Not necessarily. If the cap rate is high enough (6.50%+), and the tenant is creditworthy, a flat lease can still make sense — especially for shorter hold periods. Just know your income won’t grow, and your exit value may be limited.

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Conclusion: Model the Income, Not Just the Cap Rate

Cap rate is a snapshot. NOI growth is a storyline.

If you’re buying a NNN asset for a 10-year hold — especially with 1031 capital — your decision should be based on the long-term cash flow trajectory, not just a 5.50% yield in Year 1.

When you combine the right tenant, lease structure, and location, you can build a portfolio that doesn’t just pay — it grows.

Want help analyzing deals with the strongest NOI growth profiles over 10-year hold periods?

Let’s transact.