Determining the size of a real estate lease

Kiosk rental

Conducting an independent expert assessment of the amount of rent is mandatory if you need:

  • lease the property;
  • rent property;
  • to conduct a leasing transaction;

The rental rate is the amount of payments for the period specified in the lease agreement. The rental fee rate should ensure that the lessor receives a profit not lower than the average rate for invested capital, and for the lessee the cost should be lower than the cost of a bank loan for the purchase of machinery and equipment.

Objectives and situations of rent assessment.

Determination of the rental rate is necessary when renting out industrial, warehouse, office premises, land plots and other property owned by the state to determine the fair amount of the lease amount.

Determining the rent allows you to determine the fair amount of the fee when renting out property in situations where the owner or an authorized person is not able to determine the amount of the rate independently. Such a situation may arise, for example, when renting out non-standard property (unique equipment or a building requiring significant or major repairs)

The procedure for assessing the rental rate.

The determination of the rental rate is based on the premise that the capitalized profit (net of taxes and mandatory payments) received from the operation of the facility is equal to the market value of the leased property. Thus, in the absence of information on the amount of rental rates on the open market, the Appraiser can calculate the size of the market value of the property, and then, having determined the size of the entrepreneur’s profit margin, determine the size of the rental rate for the property.

Step by step, determining the size of the rental rate looks like this:

  • Determination of the market value of the property by the maximum number of approaches (costly, comparative, profitable);
  • Determination of the discount rate corresponding to the operation of this property;
  • Determination of the profit that the object is capable of bringing;
  • Due to the fact that the landlord logically should not take 100% of the profit from the operation of the property from the tenant, we determine the profit shares remaining with the parties;
  • The share of profit in monetary terms remaining with the lessor is the amount of rent for the use of the property.

Documents required for rent assessment:

  • Documents confirming the right to the object (ownership, lease, etc.);
  • BTI documents for the object. (Floor plan and explication of the house);
  • Information about the presence of encumbrances on the object, including encumbrances with collateral or debt obligations, the presence of tenants, legal reservations, agreements, contracts, contracts, special tax charges and other restrictions on use (if any);
  • Data on the physical boundaries of the object (copies of the geodetic plan or map with the designation and description of the location of the object);
  • Documents confirming the right to land ownership, lease, etc.);
  • Data on the structures that are part of the object;
  • Data on property (if any) that is not immovable;
  • Information about structures, outbuildings, infrastructure facilities and other improvements located on the land plot.