VALUATION GUIDE
How to Build a Real Estate DCF
A real estate DCF values forecast property cash flow and terminal proceeds at a risk-adjusted discount rate.
In this guideWhat the analysis measuresCalculation frameworkUnderwriting reviewHow to use the result
What the analysis measures
Forecast rent, vacancy, operating costs, recurring capex and other property cash flow over an explicit hold period. Keep financing out of an unleveraged DCF.
Calculation framework
Discount each period’s net cash flow according to its timing. Calculate terminal value from forward stabilized NOI divided by an exit cap rate and deduct selling costs.
Underwriting review
Check that discount rate, inflation, growth and cap rate assumptions are internally consistent. Nominal cash flow requires a nominal discount rate.
How to use the result
Compare DCF value with direct capitalization and market evidence. Use sensitivity tables to show how discount rate and exit cap drive value.