Earn More from Your Telecom Tower Lease

Let’s take a look at apples-to-apples investment scenarios comparing typical rent to some alternatives available with a prepayment.

To establish a baseline example, say you receive $1,500 per month and your rent increases 4% every year. If you were to invest your entire rent check every month at a healthy 7% rate of return, and you think there is only a 3% chance your lease might be terminated in any given year, your invested rent stream might look like this over time.

Now let’s assume you receive a lease prepayment of $160,000 and are then able to purchase a $800,000 investment property with 20% down and a 5% interest rate mortgage. You would now have a tangible asset with equity that is no longer subject to any kind of “termination”.

Furthermore, if we assume a realistic investment return (CAP Rate) of 5%, an annual increase in property value of 4%, property taxes of 2%, and that the property rent is increased 4% every year, your invested lease prepayment could look something like this over time. This is without any added value you may be able to add to an investment.

If you own a business or want to start one, there are countless ways you can use a lease prepayment of $160,000 to help it grow. It could be leveraged to secure a small business loan, hire an additional employee, increase marketing efforts, upgrade back-office systems, open a new location, you name it. You are in charge and know how it could be used best.

If you achieve a 10% return by investing in your business, this is the impact your prepayment could have over time.

Many landlords are counting on their rent check to cover expenses in their retirement years. Not only is this an extremely risky approach considering the very real possibility that the site can be terminated or the rent is reduced, but there are other established retirement strategies that can bring a greater and much safer return.

Let’s say that by working with a financial planner you are able to put your prepayment to work through your superannuation gaining a 10% return. This is how a well-managed investment plan might compare over time.

Whether it’s a personal loan, credit cards, or an equity line of credit, paying off debt can not only be a huge emotional relief, but also one of the most impactful ways of using your $160,000 prepayment. Let’s assume you have borrowed money from various sources with a blended 8% interest rate (for reference, the average Annual Percentage Rate for variable rate credit cards is over 15%).

The chart illustrates how much money you would save over time by using your prepayment to reduce your debt.