Reversionary freehold valuations: over‐rented cash flows by spreadsheet

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

The spreadsheet template allows the valuer to value the over‐rented cash flow by modified or full DCF.

Practical implications

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.

Originality/value

The technique is not original but the spreadsheet template helps to explain the profile of the cash flows derived from over‐rented properties.

Citation

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/10.1108/14635781311322256