The Core Comparison: What You Give Up vs. What You Get
When a buyout company offers you a lump sum for your lease income rights, they are offering you the present value (by their calculation) of all future rent payments. You give up the right to receive those future payments in exchange for money today.
The question is whether the lump sum they are offering is worth more or less than the income stream you are giving up — measured by a fair, market-based methodology rather than the buyout company's return-target methodology.
Scenario Analysis: Specific Numbers
Lease: $1,500/month. Annual escalation: 3%. Remaining term: 20 years. Buyout offer: $170,000.
| Scenario | Total Undiscounted Income | Present Value at 5% Cap Rate | Buyout Offer |
|---|---|---|---|
| Keep the lease | $487,000 total | $248,000 (market value) | — |
| Sell the lease | — | — | $170,000 (initial offer) |
| After negotiation | — | — | ~$220,000-230,000 |
In this scenario: holding the lease is worth $248,000 at market cap rates. The initial offer of $170,000 is 31% below market. A negotiated offer of $220,000-230,000 still leaves you giving up roughly $18,000-28,000 in present value — a premium for liquidity.
When Holding Beats Selling
Holding is generally better when: the buyout offer is significantly below market value; your lease has many years remaining; your rent is at or below market (upside potential from renegotiation); you have no urgent capital need; and you are comfortable receiving monthly income rather than a lump sum.
When Selling Makes Sense
Selling may be the right choice when: the offer approaches market value after negotiation; your lease has a short remaining term with uncertain renewal; your specific capital needs favor the lump sum; your current rent is below market and renegotiation is unlikely; or estate planning considerations favor converting the income stream to liquid capital.
Before making this decision, get an independent valuation. The comparison only makes sense when you know the true value of what you have.
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