Rent expenses at the development phase of a project
Hi everyone,
I am given a modeling test to build a pro forma for a company that leases buildings on a long term and rent them out separately as office spaces after renovation.
In the assumption, there is 10 month free rent period for the company.
Say if the rent period is 15 years, and each year the rent is 1 mil.
IT takes the company 9 months to get the office space ready, which means they won't be able to operate until month 10.
Do I start putting in the rent expenses at month 10 or from day 1?
Thank you!
Hi Emma-Y, check out these resources:
No promises, but sometimes if we mention a user, they will share their wisdom: Daniel-Coutinho BillBurr RESC
Hope that helps.
It takes 9 months from close to renovate the building and have the tenant move in on month 10.
The first 9 months will have carrying costs associated with holding the building. The costs associated with the 9 month rehab should incorporate all of these expenses in some form (soft or hard costs). For example, even though their is no tenant yet you will have taxes due, debt and interest payments, etc.
Depending on the lease terms, when the tenant moves in they will likely be picking up those expenses. (CAM, Tax, Insurance, Rent).
I would need more information about the assumptions they gave you to give you more details info though.
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