Discounted Cash Flow Analysis for Real Estate

4 Easy Steps
1

Determine the Holding Period

Set the number of years between purchase and expected sale of the asset.

2

Estimate Cash Flow

Make a forecast of the expected cash flows from operations for each year during the holding period.

3

Estimate Sale Proceeds

Enter the expected sale proceeds after closing costs to be received in the final year of the holding period.

4

Select Discount Rate

This is the required rate of return, or the return that could be generated by an alternative investment with the same amount of risk.

What is a Cap Rate?

Cap rate is an abbreviation for capitalization rate and there are a few different ways to calculate it.

How to Find the Market Value of a Real Estate Investment

If everyone had access to perfect information, all parties would come up with the same value for a given piece of property.

How to Find Total Expected Returns

Two approaches for determining total expected returns.

How to Find Cap Rates

Learn three different ways to find cap rates from our informative video.

Sell Your Home to a Real Estate Investor and Fetch a Higher Price

You'll usually make the most profit by selling to a traditional homebuyer. But this isn't always the case.

When to Use Direct Capitalization

It's not always best to use NOI over cap rate to find a property value. Let us break it down for you.