3 ms·
This isn't exactly my wheelhouse, but doesn't that completely gloss over stuff like time-value of money, and the fact that it's converting illiquid to liquid?
by tunesmith 12y ago
This isn't exactly my wheelhouse, but doesn't that completely gloss over stuff like time-value of money, and the fact that it's converting illiquid to liquid? Not sure why a landlord would go through the aggravation and uncertainty of buying out the tenant and then selling if it was only break-even.
- tedunangst 12y agoAs noted, the correct methodology would be discounted cash flows. Instead they're assuming the market has already done that analysis and that they can measure the result indirectly through sale prices. If option A sells for X and option B sells for X + Y, you should be willing to pay up to Y to take option B. The market may not have done the cash flow valuation correctly, but the owner is selling in that market, not the ideal market, so it doesn't matter. The market prices also account for the "hassle factor" so it may even be more accurate than a spreadsheet calculation.