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Discounted Cash Flow Analysis for Real Estate Investments – Free Spreadsheet .xls


I am a huge follower of Warren Buffett.  I’ve been reading his shareholder letters since I was 12.

 

warren-buffett-quote-on-real-estate

 

I know a lot of you will have questions about what exactly is a “distressed” price.  Instead of providing some rule of thumb (which I HATE – because every market is different).  I will leave you with another quote.  This quote is from John Burr Williams, author of “The Theory of Investment Value”

“The value of any stock, bond or business today is determined by the cash inflows and outflows-discounted at an appropriate interest rate-that can be expected to occur during the remaining life of the asset.” John Burr Williams

What’s a Discount Rate and How do I use it regarding Real Estate Investment Analysis?

I’m Glad You Asked!

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The discount rate takes into account the time value of money (the idea that money available now is worth more than the same amount of money available in the future because it could be earning interest) and the risk or uncertainty of the anticipated future cash flows (which might be less than expected). Source: Investopedia

To apply a discount rate to your real estate investments I created a free spreadsheet for all of my readers:

DCF, Real Estate Cash Flow

Direct Download: DCF_Real Estate