Discounted cash flow (DCF)
Discounted cash flow (DCF) is a valuation technique used to determine the value of a real estate asset, using a projected cash flow and then discounting that cash flow.
This section provides a practical guidance for when to use a discounted cash flow to value real estate, giving a general understanding of how to create a DCF and how to collate the assumptions.
Discounted cash flows are extremely versatile and can be used for all asset classes, including developments and operational assets, some of which are covered in Specific applications of DCFs.
It’s important to have a strong understanding of how DCFs work before relying on valuation software.
There is a Discounted cash flow examples spreadsheet available for download with this section.
This section is maintained by Lucy Gordon of Excel in Property.
| Sign up to RICS' Global Discounted Cash Flow (DCF) Web Class, a three-part series on how to apply the DCF framework run throughout the year. |
Related content
RICS standard: RICS Valuation – Global Standards (Red Book)
Red Book and valuation hub – for face-to-face learning, conferences, events and news
isurv Valuation: Valuation approaches
RICS Journals: Guidance on DCF for valuation of investment property updated
RICS practice information: Discounted cash flow valuations