Discounted Cash Flow (DCF) Analysis
DCF analysis is an income approach method that values a property by projecting future net cash flows over a holding period and discounting them back to a present value using a discount rate. It typically incorporates a reversion (terminal value) at sale.
- Where it applies
- Generally, not specific to New York
- When it comes up
- Acquisition underwriting; recap; refinance
- Property types
- Income-producing assets; value-add and transitional underwriting
In practice
In institutional underwriting, DCF is often where lease rollover, downtime, TI/LC, and market rent assumptions are explicitly embedded.
Related terms
Valuation and Appraisal
- Appraisal Standards of Professional Practice
- Capitalization Rate (Cap Rate)
- Direct Capitalization
- Income Approach
- Present Value (PV)
- Sales Comparison Approach
- Uniform Standards of Professional Appraisal Practice (USPAP)
General information, not legal, tax or financial advice.