Question:
What rate would a long term lease discount a commercial property? Can somebody explain a “right to first refusal” for me. I belive I have a handle on it just want to make sure.
Howdy Dell Investor:
Long term leases may not discount the value at all. Leases are usually broken up into option terms where the tenant has the option to renew the lease at a new rate. As an example a 15 year lease may be a 5 year lease with 2 5 year options. Some leases even have cost of living increases built into them every year. With a aggressive lease like this you can actually increase the value of the property.
First right of refusal is a free option. A seller or landlord may give you the right to buy or lease before they deal with another party. Keep in mind that it must be in writing to be enforceable.
Thanks