Market value via the present value of future cash flows
The discounted cash flow (DCF) approach determines the market value of a property by discounting all net cash flows expected during the holding period, as well as the sales proceeds at the end of the planning horizon (exit value), back to the valuation date.
Unlike the standardized income approach under ImmoWertV, which relies on a simplified, static calculation model, the DCF approach explicitly reflects the actual payment structure over multiple years — including lease expirations, re-letting, incentives, and maintenance cycles. It is the internationally established standard under the RICS Red Book and IVS and is generally required by foreign investors, funds, and lending institutions.
DCF value — simplified formula:
Market value = Σ Cash flowₓ ÷ (1+r)ᵀ + Exit value ÷ (1+r)ⁿ
r = risk-adjusted discount rate, n = planning horizon (typically 10 years)
DCF method
- Multi-year cash flow model
- Derivation of the discount rate
- Determination of the exit value
- Sensitivity analysis
- Documentation in accordance with RICS / IVS
Applications of the DCF approach
The DCF approach is the valuation standard for institutional investment properties — from transactions to ongoing portfolio reporting.
International investors
Foreign investors, funds, and family offices expect a valuation in accordance with the RICS Red Book or IVS — here, the DCF approach is the recognized standard, not the ImmoWertV income approach.
Transaction and acquisition due diligence
In investment deals and portfolio transactions, the DCF model illustrates the expected return over the planned holding period — a basis for acquisition decisions and price negotiations.
Balance sheet valuation under IFRS
For fair value measurement under IFRS 13 / IAS 40 in fund and consolidated financial statements, the DCF approach is the standard valuation methodology.
Asset and portfolio management
For ongoing reporting, refinancing, and value updates during the holding period, the DCF model provides transparent, periodically updatable value estimates.
Process of the DCF approach
Cash flow modeling
Analysis of the lease structure (terms, indexation, options), assumptions regarding re-letting, and maintenance and management costs. Development of the multi-year cash flow model, typically covering 10 years.
Market and rental assumptions
Determination of market-based new letting rents, vacancy and incentive assumptions, and realistic rental growth rates based on current market data.
Derivation of the discount rate
Derivation of the risk-adjusted discount rate, taking into account property risk, location quality, market environment, and financing structure.
Determination of the exit value
Calculation of the terminal value at the end of the planning horizon by capitalizing the annual rent of the final planning year using a market-based exit yield.
Present value determination & sensitivity analysis
Discounting of all cash flows and the exit value back to the valuation date. Presentation of the sensitivity of the market value to the discount rate, exit yield, and rental growth.
Request a DCF valuation
We prepare the DCF valuation for your investment property — including a multi-year cash flow model, derivation of the discount rate, and documentation in accordance with RICS / IVS.
