An introduction to property valuation

This is a draft of Chapter 2 of a book I am developing on real estate finance. Introduction “What’s it worth?” That is the most fundamental question an investor faces when considering the purchase of an investment property. In this chapter, we argue that the value of an existing property can be estimated by calculating the present value of the cash flows it delivers to its owner. For a student of finance, this is not a new idea. To apply this idea to investment property requires one to answer the following: 1. How much cash flow to the investor will the property generate during your holding period? 2. At what rate should those cash flows be discounted back to today?