Rent Credit

This concept is often referred to as a "Seller's Credit" or a "Rent Credit." Here, the seller leases the building to a tenant, offering a period of free rent as an incentive. The seller then increases the net operating income (NOI) to reflect a fully rented building, even though no actual rent is being collected during the free rent period.

This inflated NOI is used to calculate the property's value based on the capitalization rate (Cap Rate), thereby raising the selling price. To offset the effect of the free rent, the seller then provides a credit to the buyer at closing for the equivalent amount of the free rent. This allows the buyer to effectively receive the rent that would have been paid during the free rent period, even though the tenant isn't actually paying it.

This is a common tactic used by sellers to make a property appear more attractive and valuable to potential buyers. It's important for buyers to carefully review the terms of any such arrangements and understand how they impact the property's financials and the transaction's economics. They might want to consult with a real estate attorney or accountant to ensure they understand the implications fully.

Do note that this practice might vary regionally and among different real estate markets, and is subject to laws and regulations.