• A.CRE
    • Accelerator Home
    • A.CRE Home
    • Careers
    • CRE Event Calendar
    • CRE Job Board
    • Education
    • Library of Excel Models
  • COURSES
  • LEARN MORE
  • ENROLL
  • LOGIN
    • Accelerator Member
    • Enterprise Member
A.CRE AcceleratorA.CRE Accelerator
  • A.CRE
    • Accelerator Home
    • A.CRE Home
    • Careers
    • CRE Event Calendar
    • CRE Job Board
    • Education
    • Library of Excel Models
  • COURSES
  • LEARN MORE
  • ENROLL
  • LOGIN
    • Accelerator Member
    • Enterprise Member

Present Value

  • Home
  • Present Value

Present Value

The lump-sum value today of a string of future cash flows discounted back to today at a specified discount rate. In real estate, the Present Value of a real estate investment is the price that an investor would be willing to pay today for a string of future real estate cash flows so as to achieve a given target return (discount rate). In order to calculate Present Value, a discounted cash flow statement must be built forecasting the future net cash flows of a real estate investment.

Net Present Value is the Present Value of investment inflows (i.e. positive cash flows) less the present value of investment outflows (i.e. negative cash flows). In most cases, this means calculating the present value of all future cash flows, and subtracting the amount paid for the investment in time zero.

So, if the Present Value of an investment is $1,000,000 and the investor must pay $750,000 to acquire that investment, the Net Present Value would equal $250,000 ($1,000,000 – $750,000).

In Excel, the Present Value is best calculated using the NPV() function, not including the value in time zero in the selected range. NPV is arrived at by calculating the Present Value and then subtracting the amount invested in time zero.

Related Content:
  • Glossary: Time Value of Money
  • The Lakefront Retail Assignment
  • Modeling Multifamily Leases - Wrapping It Up
  • Calculating Payment and Loan Payoff
  • Ground Leases, Valuation, and Impact on Cash Flow
« Back to Glossary Index
  • Share:
A.CRE
A.CRE
AdventuresinCRE.com (A.CRE) was started by Spencer Burton and Michael Belasco during their first year of graduate real estate studies at Cornell University. The site was initially meant to fill a need for readily available real estate financial modeling tools. Today, it is the web's preeminent real estate financial modeling, careers, and education resource.

Next post

Curtailment
June 29, 2018

You may also like

What’s New – Accelerator Changelog
1 August, 2019

Not yet an Accelerator member? Click here to learn more and to join. January 2021 New case study: The Cellon Group – Real Estate Asset Management Analyst Test Added solution to ‘The Cellon Group – Real Estate Asset Management Analyst …

Topics Views List

  • New posts since last visit

Forum Navigation

  • A.CRE
    • Accelerator Home
    • A.CRE Home
    • Careers
    • CRE Event Calendar
    • CRE Job Board
    • Education
    • Library of Excel Models
  • COURSES
  • LEARN MORE
  • ENROLL
  • LOGIN
    • Accelerator Member
    • Enterprise Member
logo-eduma-the-best-lms-wordpress-theme

[email protected]

Company

  • About A.CRE
  • Library of Excel Models
  • CRE Careers
  • CRE Education

Accelerator

  • Login
  • Changelog
  • Courses
  • Enroll

Support

  • Accelerator Guide
  • Forums
  • Contact Us
  • FAQ

Other Resources

  • Glossary of CRE Terms
  • Graduate Education
  • CRE Interviews
  • Deep Dive Series

Presented by Adventures in CRE - Copyright 2020

  • Privacy
  • Terms
  • Disclaimer