Question : How to measure the NPV of a real-estate property?
Can somebody explain to me how to make an NPV and IRR analyses of a real-estate property? Where do the cash inflows come from?
- asked by Preslav R
All Answers:
Answer #1
The cash flow would come from rentals, leases, orthe use of the property for the owner's businessor use. NPV will measure the rate of return forthe investment while taking inflation intoaccount. IRR will likewise attempt to determinethe potential future earnings of the project. Since both of these involve seeing into thefuture, pessimistic outlooks may wind up doingbetter than optimistic ones. The key to makingthese decisions is having a firm grasp of what thecurrent rental rates are, what expenses the ownerwould be responsible for, and realistic vacancyrates for the neighborhood/use/type of tenant. hope this helps,good luck!
- answered by slogoing@sbcglobal.net
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