I am obviously not a big poster, but I have read these boards for years and seen many of you provide a lot of valuable knowledge and insight. I have a financial business decision to make and thought some of you guys may know best.
Short version:
If you have four years remaining on a five year lease and you want to purchase the building now, is it common for you (the buyer) to pay a sum of money to “buy-out the lease” – 50% of the remaining lease in this case? I have heard of tenants buying out a lease in order to leave, but not sure if this is common when the tenant is purchasing the building.
Long version:
I currently lease the real estate / building for my business. I am at the end of year one of a five year lease agreement. I have the option to purchase the real estate / building at the end of year five for the current market value at the beginning of the lease agreement plus 10%.
I purchased the business last year and wanted to purchase the building as well, but the seller only wanted to lease the building. Now, the seller wants me to purchase the building at current market value and pay 50% of what I would have paid in lease payments over the remaining 4 years...
Let’s assume the real estate was worth $100k at the beginning of the lease agreement last year. I have the option to purchase for $110K at the end of year five. Or, I can purchase now for $125K (including buy-out).
Numbers wise, I should benefit from purchasing now and paying the buy-out. However, I feel a little duped by the situation. Should I just ignore the principle in this case and go with the best option?
Any advice? Thank you in advance!
Short version:
If you have four years remaining on a five year lease and you want to purchase the building now, is it common for you (the buyer) to pay a sum of money to “buy-out the lease” – 50% of the remaining lease in this case? I have heard of tenants buying out a lease in order to leave, but not sure if this is common when the tenant is purchasing the building.
Long version:
I currently lease the real estate / building for my business. I am at the end of year one of a five year lease agreement. I have the option to purchase the real estate / building at the end of year five for the current market value at the beginning of the lease agreement plus 10%.
I purchased the business last year and wanted to purchase the building as well, but the seller only wanted to lease the building. Now, the seller wants me to purchase the building at current market value and pay 50% of what I would have paid in lease payments over the remaining 4 years...
Let’s assume the real estate was worth $100k at the beginning of the lease agreement last year. I have the option to purchase for $110K at the end of year five. Or, I can purchase now for $125K (including buy-out).
Numbers wise, I should benefit from purchasing now and paying the buy-out. However, I feel a little duped by the situation. Should I just ignore the principle in this case and go with the best option?
Any advice? Thank you in advance!
