Real estate DCF calculator
What a rental property is worth to you, given the return you need from it: its income and its eventual sale, each discounted back to today. Compare that with the asking price and you have the most you can pay.
Year by year, in today's dollars
Scroll the table sideways to see every column.
| Year | NOI | Sale, net | Worth today per dollar | Present value |
|---|---|---|---|---|
| 1 | $36,000 | — | $0.9259 | $33,333 |
| 2 | $36,000 | — | $0.8573 | $30,864 |
| 3 | $36,000 | — | $0.7938 | $28,578 |
| 4 | $36,000 | — | $0.7350 | $26,461 |
| 5 | $36,000 | — | $0.6806 | $24,501 |
| 6 | $36,000 | — | $0.6302 | $22,686 |
| 7 | $36,000 | — | $0.5835 | $21,006 |
| 8 | $36,000 | — | $0.5403 | $19,450 |
| 9 | $36,000 | — | $0.5002 | $18,009 |
| 10 | $36,000 | $564,000 | $0.4632 | $277,916 |
The sale
The value
- At the asking price, this property earns less than the return you require.
How a discounted cash flow works
A dollar you will receive in 10 years is worth less than a dollar today, because today's dollar could be earning your required return in the meantime. At 8.0%, a dollar arriving at the end of year 10 is worth $0.46 today. A discounted cash flow applies that to each year's net operating income and to the sale at the end, and adds them up. The total is what the property is worth to someone who needs 8.0% from it.
What the answer tells you
Take the closing costs and repairs off that value and you have the most you can pay and still earn your rate. If the asking price is above it, the net present value is negative: at that price the deal earns less than you require. On the example, with nothing changing, the property is worth $502,804 to you at 8.0%, against an asking price of $600,000. The rate at which the two meet, 5.3%, is what the property itself returns at the asking price.
Why it leaves out the loan
A property is worth the same whoever buys it and however they pay. The loan changes the return on the cash you put in, not the value of the building, so this calculator discounts the property's own cash flows, before any debt. To see what a loan does to your return, use the real estate IRR calculator.
The discount rate is yours
The discount rate is the return you need to make this deal worth its risk and its work, measured against what your money could earn elsewhere. This site does not suggest one. A higher rate makes every future dollar worth less, so the value falls as the rate rises, and the grid beside the results shows by how much.
How much of the value is the sale
On the example, 52% of the value arrives at the end, as the sale. That share rests entirely on your exit cap rate or price change, which is why the calculator shows it: the more of the value that comes from the sale, the more the answer depends on a guess about a buyer years from now.
What this leaves out
The figures are before tax and before capital spending during the hold, which NOI excludes by definition. Each year's income is counted at the end of the year. And the value is only as good as the forecast behind it: rent growth, expense growth and the exit are your inputs, and the example's are a baseline in which nothing changes.