DCF Analysis

Definition

Discounted Cash Flow analysis—a valuation method projecting future cash flows and discounting them to present value; the quantitative investor's favorite way to prove their thesis.

Example Usage

Our DCF analysis shows the property is undervalued at $500,000, with a projected NPV of $75,000.

Origin

Financial analysis technique developed in the 1960s

Fun Fact

DCF analyses are highly sensitive to assumptions—change your growth rate by 1% and the value can swing $100,000+.

Source: Financial Analysis Standards

Related Terms

Intermediate

scratch and dent

Industry slang for properties with minor cosmetic issues that scare away typical buyers but are catnip to investors and DIYers. Think ugly carpet and dated wallpaper, not structural disasters—though agents sometimes blur that line.

🏠 Real Estate

Beginner

loan-to-value ratio

The percentage of a property's value that's borrowed, calculated by dividing loan amount by appraised value or purchase price. The number that determines whether lenders think you're responsible or reckless.

🏠 Real Estate

Advanced

assignment of contract

The legal sleight of hand where a buyer transfers their purchase contract to another buyer before closing, often used by wholesalers who never intended to own the property. It's contract flipping without the renovation show.

🏠 Real Estate

Intermediate

LTV Ratio

Loan-to-Value ratio—the percentage of the property's value you're borrowing, expressed as a percentage of the purchase price.

🏠 Real Estate

Advanced

Subject-To Transaction

Buying a property while leaving the original mortgage in place—you take the deed but not the loan, assuming the seller won't trigger the due-on-sale clause.

🏠 Real Estate

Intermediate

real estate owned

Property that reverted to lender ownership after foreclosure, becoming the bank's problem instead of yours. These properties are the financial equivalent of returned merchandise.

🏠 Real Estate

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