Future Value of a Lease | TigerDroppings.com

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tigerfan102

# 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

re: Future Value of a Lease

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

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Broke

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

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

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

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

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

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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