Calculating Effective Net Rent

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Course Description

Due to the long-term nature and variable cash flow of many leases, it is important to understand the concept of effective net rent, or the total amount of cash flow generated by the lease, adjusted for the time value of money. Discounted cash flow analysis is a key tool to determine the financial impact lease terms and concessions have on property income. The real value of your leases drives cash flow, which in turn drives property value. Join Tom Elmer, CPM®, as he covers key principles of the time value of money and demonstrates how to calculate effective net rent using the Effective Rent tab of the IREM Financial Analysis Spreadsheet.

Learning Objectives:

  • Review concepts and mechanics of time value of money (TVM)
  • Discuss how amount and timing of lease terms and concessions impact the value of a lease
  • Compare lease alternatives using discounted cash flow (DCF) analysis to calculate effective net rent

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