Property Valuation
What is 'discounted cash flow' (DCF) analysis in Delaware commercial real estate?
AA method of calculating the discount the seller will accept from the asking price
BAn investment analysis technique projecting annual cash flows over a holding period, applying a discount rate to convert future cash flows to present value, and summing to determine the maximum supportable purchase price✓ Correct
CA quick calculation used by residential agents to estimate value
DA Delaware government formula for calculating property transfer tax
Explanation
DCF analysis projects annual property cash flows (NOI minus debt service) over a projected holding period (typically 5–10 years) plus a terminal/reversion value at sale. Each year's cash flow is discounted to present value using the investor's required discount rate.
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Key Terms to Know
Net Operating Income (NOI)
The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Transfer TaxA tax imposed by state or local governments when real property ownership is transferred, typically based on the sale price.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
Math Concepts
State-Specific Concepts
Transfer Tax
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