Leasehold Valuation


Real estate appraisal is one of the most popular types of appraisal, including appraisal of property rights or other rights (lease right, right to use, etc.) in relation to the following objects:

  • land;
  • objects of residential real estate (apartments);
  • Suburban real estate (cottages, cottages, gardens);
  • objects of commercial real estate (office premises, hotels, retail, warehouse and industrial areas);
  • facilities and transfer devices;
  • unfinished construction objects.

Real estate valuation is extremely important to ensure the effectiveness of any investment in it.

Property value is determined by a number of factors (location, availability and quality of infrastructure, transport accessibility, nature of the surrounding buildings, physical characteristics and volumetric-parametric solutions of the object of assessment itself, etc.).

The object of the research is relations concerning the valuation of leased and mortgaged property.

Subject of research – theoretical and applied issues of valuation of leased and mortgaged property.

The purpose of the work is to reveal the peculiarities of valuation of leased and mortgaged property, to acquire skills in the formation of calculations.

To achieve this goal it is necessary to solve the following tasks:

  • give a general description of the property valuation and identify the features of the valuation of leased and mortgaged property;

The methodological base of the research is a complex of general scientific and private-scientific methods and techniques of scientific knowledge.

The structure and scope of work is determined by the subject, purpose and task of the research and the logic of the presentation of the material and consists of an introduction, 2 chapters, conclusion, list of references.

Valuation of leased property

Lease is a form of a property contract in which property is transferred for temporary possession and use to a tenant for rent.

The object of the lease are movable and immovable things, including: land, enterprises, buildings, structures, equipment, vehicles and other things that do not lose their natural properties in the process of their use. The lease agreement must clearly define the specific property being leased, that is, the data allowing individualization of the rental object must be directly indicated in the agreement.

According to the laws the term of the lease agreement is established by agreement of the parties and is fixed in the agreement. If the term is not specified in the contract, then such a contract is considered to be concluded for an indefinite period. Such a case allows the parties to the contract at any time to refuse to execute it, but having warned the other party about it in advance in one month, and when renting real estate in three months.

Unlimited: the term of the contract is not determined by agreement of the parties

Long term: 5-20 years

Medium: 1-5 years

Short term: up to 1 year

Valuation of the lease right is a determination of the value in monetary terms of the paid use of an object for certain production and economic purposes. The rent is fixed in the contract and is subject to revision usually once a year.

If you want to rent out your apartment, it is very important to correctly estimate the rental rate. Do not overstate the price – so as not to lose the potential employer, and without underestimating it in order to get all the possible rental income. Typically, the subject of rent are office, warehouse, retail and industrial premises. The size of the area also affects the rental rate, because there is the effect of scale production. The smaller the room, the greater the rental rate and vice versa. Rental rates vary depending on the location of the property being valued.

Appraisal of an apartment for rent is an estimate of the rental rate, for which it is necessary to compare many factors, for example:

  1. Rights and obligations of the tenant premises;
  2. The period of validity of the lease;
  3. The presence of any encumbrances lease rights;
  4. Are there any rights of third parties to the property being valued;
  5. Area of ​​the location of the rented apartment;
  6. Distance to the metro or to the nearest public transport stop;
  7. Number of rooms and the area of ​​the apartment;
  8. Availability of furniture, equipment, telephone, Internet;
  9. The condition of the apartment, the entrance, the adjacent territory;
  10. Location of the rental apartment;

Assessment of land lease rights is carried out with:

* purchase and sale of land lease rights;

* making the right to lease land as a contribution to the authorized capital of the enterprise;

* obtaining a loan secured by the right to lease land;

* buying or selling a company that owns the right to lease land;

* merger or acquisition of an enterprise owning the right to lease land;

* estimating the total value of the company owning the right to lease land to manage the value of the business

* development of investment projects;

* litigation regarding the right to lease land; determining the initial price of the right to lease land at the auction; resolving property disputes in court;

* other operations related to the implementation of land lease rights.