Reversion

M

Mymoney

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How does one calculate the sale value of a fifty five year reversion in a property that does not generate any income during the term of the reversionary lease? Many thanks in advance. My Money.
 
Do you mean as in the case where somebody has the right of occupany of a property for 50 years - but they cannot rent out the proeprty nor can they sell it, it is purely 50 years of occupation before reverting to owner?
 
No ,they can build rent and sell during the remaining 55 years. They wish to extinguish the reversion now to protect their future interestin the property.Mymoney
 
Can you give any further background please?

It sounds like a valuation of an interest in a property for a fixed term.

This type of calculation is often done for Family Law work.
 
Thank you South. This is a straight forward lease purchased for its long term reversion....now some 50 odd years.
 
Some ideas when it comes to valuing the sale value of the lease:

Max (Sale Value of Property now, Rental Income Value) over the term of the lease

The rental income value would need the current rent, probability of voids, a suitable discount rate to discount future cashflows, and estimated rental growth over the term of the lease.

Quality of tenant should also be factored in!!
 
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