Question
You want to buy a house for which the owner is asking $625,000. The only problem is that the house is leased to someone else
You want to buy a house for which the owner is asking $625,000. The only problem is that the house is leased to someone else with five years remaining on the lease. How ever, you like the house and believe it will be a good invest ment. How much should you pay for the house today if you could strike a bargain with the owner under which she would continue receiving all rental payments until the end of the five-year leasehold, at which time you would obtain title and possession of the property? You believe the prop erty will be worth the same in five years as it is worth today and that this future value should be discounted at a 10 per cent annual rate.
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