ABSTRACT
Chapter 1 of Practical Finance for Property Investment examines leases. Readers of this chapter will gain familiarity with all of the common features found in an investment property lease. These features include space, term, rent, sharing of expenses, concessions, and options. The chapter also introduces a framework for property investors to decide among leases. In particular, the chapter defines and demonstrates 2 empirical approaches – lease present value and effective rent – that are common metrics used to value leases in practice. The chapter also presents many features that influence lease value that are not captured by either of these 2 common approaches. In conclusion, the chapter presents a case study where both quantitative and qualitative factors must be weighed to make optimal leasing decisions in a retail property context.
