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Collect Rent as a single annual payment or quarterly/semi-annually/monthly

C

Clarion1

New Member
Hi All:
I am an ex chandoo student who started out when Chandoo was still accessible by phone:)

My excel knowledge is very basic compared to many of the folks in this forum so I apologize in advance if my questions sound too basic.

Here goes:
I have an apartment that I rent out to earn additional income. The market norm in the region is that rents are paid as a single check but this is rapidly changing. Tenants often want to pay semi-annually (2 checks/year); quarterly (4 checks/yr).
Needless to say, folks want a reduction in rent if they pay a lump sum. As the payment frequency increases, the rent goes up.
For example, the tenant is offering me 40K lump sum payment or 45K if he can pay me quarterly.

I need a spreadsheet that can quickly help me decide what the better deal is. I want to be able to plug in a couple of inputs and have it spit out results that will help me decide which option is best.
Can someone help me?
Thank You
 
Help me better understand.

So long as the renter remains in the apartment .. if he pays you quarterly you stand to earn 5 thousand more per year ?

45,000 - 40,000 = 5,000 gain on rent.

Quarterly is a better deal. Yes ?

What else are you needing to include in the factoring ?
 
There's less risk in taking a lump sum. Checks paid over the 4 quarters can bounce, tenants may request you to postpone cashing the check because they don't have sufficient funds at the time to cover the payment.
I believe the calculations involves the present value of money.... If someone gave you 40000 now or 11,250 every 3 months which is better..... 40K could be invested throughout the year not when you get the funds in intallments.
 
No vba solution ... just a few comments.

If you are guaranteed 40,000 without fear of bad payment vs. quarterly and a chance of bad payment ... it settles on your willingness to accept risk and the frustration of recovering your payment/s.

I'm confused why a one time payment is certain and quarterly payments are not. What prevents a renter from making a bad / no-value one time payment ?

My risk level willingness is low. If faced with the prospect of a sure thing good one time payment vs a sure thing quarterly bad payment, I'd take the yearly payment.

I don't believe any spreadsheet formula is going to figure this out for you. It comes down to your risk level willingness.

My 2 cents.
 
Yes, you are right .... it depends on my risk tolerance but I want to be able to quantify the two options so I can see the spread and then decide at what point am I going to choose the riskier option
 
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