george - "Yes, technically, but what really matters is the discounted cash flow.
So you need to know what the rental property would sell for today so we can calculate the discount rate.
Right?"
Not exactly. DCF is calculated on your current Free Cash Flow from rents (the actual cash you receive), not what the property is worth today. If you were selling the property and re-investing it in another property it would need to be in the calc. If your DCF is above your hurdle rate then you should invest in it.
As for the discount rate, that is based on your current cost of capital. If you have a fixed rate mortgage then that is the Discount Rate (adjusting for other operating expenses).
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Toothpaste for Dinner
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by JD@Preview » Fri May 18, 2007 2:40 pm
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by twistjusty » Fri May 18, 2007 4:45 pm
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