Chapter 11
Understanding Leases and Property Valuation
IN THIS CHAPTER
Looking at leases and their terms
Comprehending valuation
Developing value benchmarks
What you pay for a property and the cash flow it generates make a significant difference in the success of your investment. Leases generate the income stream you should base your real estate investment strategy on. All the quantitative analysis we guide you through in Chapter 12 is for naught if you don’t have a handle on the leases. Therefore, in this chapter, you start your research, analysis, and evaluation of specific properties by analyzing the leases.
We then introduce you to the concepts behind evaluating potential investment properties and explain the key principles behind property valuation that you need to be familiar with. We also provide you with a few quantitative tools you can use to size up prospective properties and determine whether you should move on to other properties or investigate further.
The Importance of Evaluating a Lease
A lease is a contractual obligation between a lessor (landlord) and a lessee (tenant) to transfer the right to exclusive possession and use of certain real property for a defined ...
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