Valuation of lease rights, valuation of the market value of rental feesThe most common form of a property contract granting the right to use the property without obtaining the right of ownership is a lease or rent agreement. Leasing is a good alternative to the acquisition of property ownership in the event of the temporary nature of property use, or in the absence of necessary funds for purchase.
That is why when deciding on the possibility of renting the necessary assets, whether real estate, land, equipment or vehicle, the lessee needs a fair valuation of the rental rate.
The valuation of rental rates is carried out using the maximum amount of available information on the leased property: location, technical condition, security systems, transport, communications, advanced infrastructure, etc. An important factor in the valuation of rental property is the content of the lease agreement: terms of the lease, the rights of the lessee and the existence of contractual encumbrances or restrictions of use. Also, take into account regional characteristics, the ratio of supply and demand in a particular market, and other related factors. In case there is no information on the market prices for renting this particular type of asset, the valuation can be conducted on the basis of the market value of the property and the expected rate of return for the lessee.
The right to lease the property: real estate, land, equipment, or transport is, in itself a major asset of the enterprise and can be used as a commodity, i.e. to serve as the object of sale / purchase. It should be kept in mind that the right to lease can have a negative value if the current rent is much higher than its current market price and, thus, the right to lease can act as a liability, and reduce the total cost of the enterprise. When a company is being restructured or bought (merger, acquisition), the valuation of the lease rights allows one to get a fair price of the company while taking into account all the factors at play. In addition, the valuation of the right to lease may be required when receiving financing on the security of this right, or in order to improve the effectiveness of management and investment decisions.
Swiss Appraisal offers the following:
For more about the rental rate valuation services for land and real estate, send a request via the website.