Future Value of a Lease | TigerDroppings.com

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tigerfan102
LSU Fan
Member since Sep 2005
257 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?

If you need more info please let me know

Any advice/explanation helps. Thanks.







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BigAppleTiger
LSU Fan
New York City
Member since Dec 2008
6108 posts

re: Future Value of a Lease


Residential/Commercial/Vacant Land? Area? Current value and purpose of lease?





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Broke
LSU Fan
AKA Buttercup
Member since Sep 2006
55666 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
257 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.





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tigerfan102
LSU Fan
Member since Sep 2005
257 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






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southernelite
Iowa State Fan
New Orleans
Member since Sep 2009
40714 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


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tigerfan102
LSU Fan
Member since Sep 2005
257 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






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NEWBIE
LSU Fan
Member since Jun 2008
120 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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