ROI - Where "I" = Improvement

[Perry]

So a tenant comes along and says: "I'd like a mezzanine
area in this part of my rental." Tenant and LL confer on
plans and agree on the addition. LL gets specs & a price
and tells tenant, "it's a goer."

One thing's missing from that hypothesis: What sort of
formula would the LL use in talking over with the tenant,
the increased rent to cover the ROI of the improvement?

Maybe the tenant might offer to contribute? That can be
written off quite quickly as a leasehold improvement.

[DaveW]

I have apartments which include mezzanines. They are very useful for storage, visitor sleep over, or kids play area and definitely contribute to additional value and rent.

In terms of ROImprovements, it not only boils down to your own rules but also the value of your spending dollar. Eg. painting is considered a $10 return for every $1 spent type ROI. Whereas building additions needing consent might only be a 50c return for every $1 spent, but the lower ROI jobs often produce higher capital gain.

[Wayne]

I would have thought that if the haed lease is running at say 8.5% then increase the lease by the same rate. Straight away the improvement is worth 12x what it cost.