How it works
The cash flow is the list of money in and out by year. Write that list first.
- Add the rent you will pay. Subtract the credits you treat as rent relief.
- Divide by the years or the occupied months you chose.
- Say what you put in. Say what you left out.
- Then, if timing matters, also show NPV.
Formula in words. Effective rent ≈ (rent over the term − credits you spread) / years you chose to divide by.
| Input | Meaning |
|---|---|
| Rent path | The actual rent by year |
| Credits in the average | What you chose to spread |
| Divisor | Years or months |
Worked example
Here is a teaching sample. It is not customer data and not a result from a live client.
| Metric | Lease A | Lease B |
|---|---|---|
| Start rent | $37,000 | $34,410 |
| Year-1 extras | $9,000 | $9,630 |
| Year-1 credit | $10,000 | $5,500 |
| Sample NPV | $338,047 | $327,414 |
| Year | Rent | Extras | Credit | Cash out | Value today |
|---|---|---|---|---|---|
| Year 1 | $37,000 | $9,000 | $10,000 | $36,000 | $33,333 |
| Year 2 | $38,110 | $9,270 | $0 | $47,380 | $40,621 |
| Year 3 | $39,253 | $9,548 | $0 | $48,801 | $38,740 |
| Year 4 | $40,431 | $9,835 | $0 | $50,266 | $36,947 |
| Year 5 | $41,644 | $10,130 | $0 | $51,774 | $35,237 |
| Year 6 | $42,893 | $10,434 | $0 | $53,327 | $33,605 |
| Year 7 | $44,180 | $10,747 | $0 | $54,927 | $32,049 |
| Year 8 | $45,505 | $11,069 | $0 | $56,574 | $30,565 |
| Year 9 | $46,870 | $11,401 | $0 | $58,271 | $29,150 |
| Year 10 | $48,276 | $11,743 | $0 | $60,019 | $27,800 |
| Sample NPV | — | — | — | — | $338,047 |
How to read the sample
Sample NPV for the averaged lease is about $338,047. A second path lands near $327,414. That gap is a talking point, not a promise.
The average would smear this credit. If one path wins only because a credit sat in the wrong year, start over.
Year notes for the averaged lease
- Year 1 of the averaged lease has rent of $37,000.
- Shared building cost is $9,000.
- A credit of $10,000 lowers the cash you pay that year.
- Cash out this year is about $36,000. The average would smear this credit.
- Later cash gets a shrink for time. At 8 percent, year 1 is worth about $33,333 today.
- Next, year 2 rent is $38,110.
- CAM, which is a shared building cost, is $9,270.
- There is no credit in this year.
- You pay about $47,380 this year after extras and credits. NPV would keep this year heavier after the gift.
- Time shrinks later cash. At 8 percent, year 2 is worth about $40,621 today.
- Then year 3 rent is $39,253.
- Extras for the building come to $9,548.
- Credits skip this year.
- The net cash this year is about $48,801. Steps still sit in the path.
- Waiting has a price. At 8 percent, year 3 is worth about $38,740 today.
- After that, year 4 rent is $40,431.
- The shared building cost this time is $9,835.
- No extra credit shows up this year.
- Cash out this year is about $50,266. An average can look calm while this year jumps.
- Later cash gets a shrink for time. At 8 percent, year 4 is worth about $36,947 today.
- In year 5 of the averaged lease, rent is $41,644.
- Shared building cost is $10,130.
- There is no credit in this year.
- You pay about $51,774 this year after extras and credits. The last year is why averages lie softly.
- Time shrinks later cash. At 8 percent, year 5 is worth about $35,237 today.
- Year 6 of the averaged lease has rent of $42,893.
- CAM, which is a shared building cost, is $10,434.
- Credits skip this year.
- The net cash this year is about $53,327. Keep this later year in the sum for the sample.
- Waiting has a price. At 8 percent, year 6 is worth about $33,605 today.
- Next, year 7 rent is $44,180.
- Extras for the building come to $10,747.
- No extra credit shows up this year.
- Cash out this year is about $54,927. The row still belongs in the sum for the long path.
- Later cash gets a shrink for time. At 8 percent, year 7 is worth about $32,049 today.
- Then year 8 rent is $45,505.
- The shared building cost this time is $11,069.
- There is no credit in this year.
- You pay about $56,574 this year after extras and credits. Keep this later year in the sum for the long path.
- Time shrinks later cash. At 8 percent, year 8 is worth about $30,565 today.
- After that, year 9 rent is $46,870.
- Shared building cost is $11,401.
- Credits skip this year.
- The net cash this year is about $58,271. The row still belongs in the sum for the long path.
- Waiting has a price. At 8 percent, year 9 is worth about $29,150 today.
- In year 10 of the averaged lease, rent is $48,276.
- CAM, which is a shared building cost, is $11,743.
- No extra credit shows up this year.
- Cash out this year is about $60,019. Keep this later year in the sum for the long path.
- Later cash gets a shrink for time. At 8 percent, year 10 is worth about $27,800 today.
Add those year values. The sample NPV for the averaged lease is about $338,047. This is a teaching sample, not a client result.
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How to use this with OccupancyNPV
This page answers the concept. OccupancyNPV applies it inside a DealWorkspace: enter lease scenarios, review cash-flow and occupancy cost, then compare NPV and discount-rate sensitivity. OccupancyNPV NPV is not the same as a face-rent comparison. OccupancyNPV is not a CRM or lease-administration suite, and this page is not legal or investment advice.
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