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Principles of the income and DCF approach

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  • Lorenzo Greppi

Abstract

The fundamental purpose of independent real estate valuation is to seek the market value, as being the most probable selling price, by direct or indirect comparison with buildings existing in the market. This approach is widely adopted in professional theory and practice and underpins the understanding and development of the procedures based on direct comparison and on analysis of revenue capitalisation (DCF and income approach). By indirect comparison the analysis of the revenue capitalisation leads to a market value estimate, which takes into account the assetís profitability compared with that not only of similar assets, but also of different kinds of business which represent investment alternatives. In other words it is possible ñ as well as interesting in terms of the economy and of estimations ñ to broaden the scope of a survey from the real estate market alone, as in the direct procedure, to the wider market of alternative investments.

Suggested Citation

  • Lorenzo Greppi, 2004. "Principles of the income and DCF approach," ERES eres2004_141, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2004_141
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    File URL: https://eres.architexturez.net/doc/oai-eres-id-eres2004-141
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    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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