From the course: Pre-investing: Before Investing in Real Estate

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The terminal value of an indefinitely held rental

The terminal value of an indefinitely held rental - Microsoft Excel Tutorial

From the course: Pre-investing: Before Investing in Real Estate

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The terminal value of an indefinitely held rental

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- Now a lot of the examples we've gone over and the examples we're going to go over later makes an assumption that you're going to sell the investment to realize all of the returns in the investment, but what happens if you don't intend to sell it? What happens if you just want to purchase it and hold onto it for as long as you can, keep collecting rents from this investment? How would we account for that in our investment analysis? Well, we're going to take a look at that case right here. So if you are thinking about holding a property, then we have to do a special treatment for the analysis because we're no longer going to have the sale where you're going to have the profits at the sale to generate this huge cash flow at the end. So one of the ways we can do that, and if we look at what this kind of scenario looks like, it looks like something like this, right? You invest some money. You're getting some returns every year. Hopefully it's growing, but in this example, we'll just say…

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