Valuing Early Termination Riders of Residential Lease?
I have a resident asking for a 1 yr lease and wants an ETR in case they have to leave town for work.

How would one value the premium to put on a lease for the ETR?  

thanks!
[{"id": "d5hjfzp", "text": "Are the lease terms otherwise at or near market? If he breaks the lease you'll be stuck (probably on short notice) finding a new tenant in a potential off season. Charge him a premium. \n\nAnother way to deal with it is to make it his problem. No assignment, but allow a sublease (subject to your consent, not to be unreasonably withheld) and he remains on the hook if the new tenant doesn't pay. ", "replies": [{"id": "d5i35bt", "text": "Lease terms are near mkt. I have 4,000 apartments in NYC and the mgmt company who does this for us has simply been 'eye-balling' it when coming up with premiums for the ETR.  \n\nWe built a sublease option in the ETR where the vacating tenant can fill in with a new tenant subject to credit inspection, etc..  \n\nWhat I am looking to do is almost value the ETR like an option contract on a stock.   There is an individual probability associated with breaking the lease at any time, so therefore associate that probability with the volatility of the lease and then value that volatility with the end result being the ETR premium.  Not sure if anyone is doing that now a days.", "replies": [], "depth": 2}], "depth": 1}, {"id": "d5i8tdw", "text": "why not just have a simple present value calculation for the remainder of the original lease term? They pay the greater of x months rent or PV of the lost income. That way you don't have to worry about the up front value and the tenant potentially eats shit if you can't get the same rent. At the end of the day, you got your return. ", "replies": [], "depth": 1}]