The majority of investment property is valued at a point after the original letting or agreed market rent (MR) at review. This briefing aims to look at the valuation of “over‐rented” property. That is the term used to describe a property where the current rent passing exceeds the current market rent.
This briefing looks at the valuation of over‐rented property by discounted cash flow and provides an example of setting up a flexible template by spreadsheet.
The spreadsheet template allows the valuer to value the over‐rented cash flow by modified or full DCF.
The flexibility of the template allows the user to change the length of the lease, the rent reviews and it calculates the term until the rent passing is exceeded by the estimated market rent.
The technique is not original but the spreadsheet template helps to explain the profile of the cash flows derived from over‐rented properties.
French, N. (2013), "Reversionary freehold valuations: over‐rented cash flows by spreadsheet", Journal of Property Investment & Finance, Vol. 31 No. 3, pp. 298-306. https://doi.org/10.1108/14635781311322256Download as .RIS
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