That provides less risk to the cashflow not being received and reduces the risks to the value of the Landlord’s property. Additionally, the higher the Landlord’s profit from rent, the higher the value of the Landlord’s property.
The Tenant’s profit is also the basis of the value of the Tenant’s business enterprise. The Tenant’s rental obligations have a direct impact on the Tenant profit. The higher the rent, the lower the Tenant’s profit, the lower the value of the Tenant’s business. Additionally, the Lease may have a direct impact on the saleability of the Tenant’s business. If it is un-saleable, it value is likely that its value will rest on the liquidated value of its assets less any ‘make good’ provisions in the Lease.
Small business owners need to be well aware that there is direct competition between their business value and the Landlord’s property value. Adding to the Landlord’s property value at the expense of the value of their business and its saleability may not be an ideal situation for them.
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