Equivalent Level Rate (ELR)

The equivalent level rate, or ELR, of a property is the rate per square foot of a property in dollars that will equal the varying value of a yearly lease's possible cash flow. The Equivalent level rate is a flat rate that is determined by a specific formula. To determine the ELR on a rental property, subtract the cash flows on the property's net value. Then amortize, or break down, the full sum of the value over the terms of the lease based on the square footage of the property. In other words, compare the value of the property in square feet to the cost of leasing. The equivalent level rate is most typically used to determine the value of a property in terms of renting or leasing it out. As such, this term is most typically used by a landlord in determining the overall value of a rental property.