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tigerfan102
LSU Fan
Member since Sep 2005
266 posts

Future Value of a Lease
Was hoping someone on the money board could help me with a time value of money explanation. I'm not well versed in finance. I am trying to determine the value of a lease that is being bought out. For example purposes lets assume the lease has 20 years left and must account for
Inflation, what is the best method for determining a fair price for this lease/property to be purchased at?

BigAppleTiger
LSU Fan
New York City
Member since Dec 2008
8832 posts

re: Future Value of a Lease
Residential/Commercial/Vacant Land? Area? Current value and purpose of lease?

Broke
LSU Fan
AKA Buttercup
Member since Sep 2006
62449 posts

re: Future Value of a Lease
We need to know the lease terms and we can calculate Net present value for you.

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tigerfan102
LSU Fan
Member since Sep 2005
266 posts

re: Future Value of a Lease
Commercial property currently leased to a development company. Property/lease is being purchased. The property value is currently undetermined but I'm looking more for how to determine a value for the lease which has 20 years remaining.

tigerfan102
LSU Fan
Member since Sep 2005
266 posts

re: Future Value of a Lease
Lease is complicated but on average generates \$4,000/mo

Payments made monthly, there is a base rent and a % rent but for example purposes lets assume it generates on avg 4k/mo

southernelite
McNeese State Fan
New Orleans
Member since Sep 2009
49112 posts

re: Future Value of a Lease
PV of just the payments at 4%(figure I used for inflation) is around \$662k.
This post was edited on 11/13 at 11:34 am

tigerfan102
LSU Fan
Member since Sep 2005
266 posts

re: Future Value of a Lease
Can you explain how you solve for these values? If it's easy to do so.
Cliffs will be fine

Thanks

NEWBIE
LSU Fan
Member since Jun 2008
179 posts

re: Future Value of a Lease
To get what he did, use excel:

=PV(.04/12,20*12,4000)= ~ \$660k

If you open the function tool in excel, it will explain what each number is. You can then play with the interest rate to adjust accordingly for inflation.

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