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How to calculate rental cash flows with rent increasing at varying intervals

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  1. #1
    Registered User
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    10-12-2012
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    Indiana, USA
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    Excel 2007
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    1

    How to calculate rental cash flows with rent increasing at varying intervals

    Hello first time post,
    I am trying build a template that will calculate the IRR of a the cash flows from a commercial lease based on data from the lease including term, rental rate, square footage, etc. My issue comes with trying to project the lease increases which can start at varying months and increase at varying intervals. My sheet can identify the increase and its dollar amount based on whether the increase is in dollars psf or a percentage increase, what I need is a way for the sheet to calculate the next increase based upon the prior increased rent as opposed to the original amount and to do this based upon the increase interval times that have been input from the lease.

    Any help would be appreciated and feel free to ask any questions.
    I have attached what I have so far. Lease IRR calculations.xlsx

    Again I am a new user so if this is a problem that has been solved elsewhere I apologize and would gladly be pointed in the direction of that thread, thank you for your time.

  2. #2
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    Re: How to calculate rental cash flows with rent increasing at varying intervals

    Hi,

    Can you explain what calculation you want in which column. Any example would help me to resolve your query.

    Thanks & Regards,
    Prasad

  3. #3
    MoneyMaker
    Guest

    Re: How to calculate rental cash flows with rent increasing at varying intervals

    Hello

    I have added a formula in the column for Increase Rent that updates the new rent every twelve months starting at month 25th

    The formula uses cell references for start month when rent is due, and for the number of months after which rent increase and for the rate at which rate increase

    Let me know if that's the result you expected

    I did not create an extra column for the rent increment unless you need to know the amount of each increment

    This is the formula that you would type in for Rent Increase Column for Month 1 and then copy paste to all months in that column

    =IF( B15>=$E$5, IF( MOD(B15-$E$5, $E$6)=0, FV(INT((B15-$E$5)/$E$6), $E$3, 0, -D15), FV(INT((B15-$E$5)/$E$6), $E$3, 0, -D15) ), 0 )

    B15 in the month number starting at 1

    $E$5 is the increase at period number

    $E$6 is the increase interval

    $E$3 is the rent increase percentage

    D15 is the initial rent amount
    Attached Files Attached Files
    Last edited by MoneyMaker; 10-13-2012 at 12:38 AM. Reason: Added text to show the formula and its components

  4. #4
    MoneyMaker
    Guest

    Re: How to calculate rental cash flows with rent increasing at varying intervals

    I am very sorry I screwed up the formula and put in number of periods in place of the interest rate in the FV function

    I have now fixed it and added a new column that shows the increased monthly rent amount

    The amended formula is

    =IF( B15>=$E$5, IF(MOD(B15-$E$5,$E$6)=0, FV($E$3,INT((B15-$E$5)/$E$6)+1,0,-D15), FV($E$3,INT((B15-$E$5)/$E$6)+1,0,-D15) ), 0 )

    But if the interest rate is annual then the rate would have to be divided by 12

    =IF ( B15>=$E$5, IF(MOD(B15-$E$5,$E$6)=0, FV($E$3/12,INT((B15-$E$5)/$E$6)+1,0,-D15), FV($E$3/12,INT((B15-$E$5)/$E$6)+1,0,-D15) ), 0 )

    There are four new columns

    One that shows the amount of increase in rent at the interest rate
    Second column that shows the total new increased rent

    And the third column that shows the increase in rent when the rate is annual
    And the fourth column that shows the total increased rent at this rate

    Sorry about the confusion, your problem ate away 5 hours of my time so you owe me $100 as I charge $20/hr just kidding
    Attached Files Attached Files
    Last edited by MoneyMaker; 10-13-2012 at 04:15 AM. Reason: Added spaces in formulas for clarity

  5. #5
    MoneyMaker
    Guest

    Re: How to calculate rental cash flows with rent increasing at varying intervals

    I guess by this time you have figured that I overlook the obvious or am in fact mentally challenged thanks largely to prolonged exposure to chemicals

    The files and formulas I submitted earlier do not show the rental cash flows from period 6 till period 24

    I have reflected this change in the formula and all the cash flows look right this time

    So the formulas would change as listed below

    =IF( B15>=$E$5, IF(MOD(B15-$E$5,$E$6)=0, FV($E$3,INT((B15-$E$5)/$E$6)+1,0,-D15), FV($E$3,INT((B15-$E$5)/$E$6)+1,0,-D15)), D15)

    =IF( B15>=$E$5, IF(MOD(B15-$E$5,$E$6)=0, FV($E$3/12,INT((B15-$E$5)/$E$6)+1,0,-D15), FV($E$3/12,INT((B15-$E$5)/$E$6)+1,0,-D15)), D15)

    For reference, open and browse the attached Excel worksheet
    Attached Files Attached Files

  6. #6
    MoneyMaker
    Guest

    Re: How to calculate rental cash flows with rent increasing at varying intervals

    Just to see what the rate of return is for the one who is leasing and found astonishing figures of 120% and 118% respectively based on monthly and annual percent increases in rates

    See the last two columns where I have added in the 2 semi-annual Commission amounts to get the final cash flows for 12 years
    Attached Files Attached Files

  7. #7
    Registered User
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    10-12-2012
    Location
    Indiana, USA
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    Excel 2007
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    1

    Re: How to calculate rental cash flows with rent increasing at varying intervals

    Thank you for all of the help I really appreciate it I haven't been able to check the new sheets as i am out of town away from my computer but your help is appreciated thank you for your time sorry if it consumed to much of it lol

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