All calculators
Open Real Estate Finance
Free calculator · Valuation & Returns
Discounted Cash Flow (DCF)
Estimates the value of an income property by projecting annual NOI, capitalizing a terminal value at an exit cap rate, and discounting both back to present value. Inputs are Year 1 NOI, an NOI growth rate, the hold period, exit cap rate, selling costs, and a discount rate.
Interactive Tool
Discounted Cash Flow (DCF) Calculator
Assumptions
Year 1 NOI
NOI growth per year
Hold period
Exit cap rate
Selling costs
Discount rate (required return)
Projected cash flows
| Year | NOI | PV @ 8% |
|---|---|---|
| Year 1 | $1,498,425 | $1,387,431 |
| Year 2 | $1,543,378 | $1,323,198 |
| Year 3 | $1,589,679 | $1,261,939 |
| Year 4 | $1,637,369 | $1,203,515 |
| Year 5 | $1,686,491 | $1,147,797 |
| Terminal value (Yr 6 NOI $1,737,085 ÷ 6.25%) | $27,793,364 | |
| Net sale proceeds (after 2% selling cost), PV | $18,537,383 | |
PV of cash flows
$6,323,879
5 years of NOI
PV of sale
$18,537,383
reversion
DCF Value
$24,861,262
at 8% return
An investor requiring a 8% unlevered return would value this property at about $24,861,262. Pay less and the expected return rises above 8%; pay more and it falls below.
Learn the concept
This calculator comes from the free Real Estate Finance course, where the concept is taught with readings, worked examples, and practice questions.
Built by Devon Coombs, CPA, MBA, Teaching Professor of Finance at Santa Clara University.