The idea that money received today is worth more than the identical amount of money received in the future. This is because money received today can earn interest over time, thus making it worth more in the future. Time value of money is a core principle of finance, and the foundation of various return and valuation metrics used in real estate (e.g. PV, IRR)
- 100 USD received today, when grown by 2% per annum, becomes $111.71 in five years.
- Thus, 100 USD received in five years is worth less than 100 USD received today