• Methods of Real Estate Asset Valuation

    July, 2023

At CG Capital Europe, we pride ourselves on employing a diverse range of methods to accurately assess the value of real estate assets. Among the appraisal methodologies in the sector, three stand out as particularly effective:

Discounted Cash Flow:

Our team applies the discounted cash flow by building a detailed financial model, which involves estimating future cash flows. By discounting these projected cash flows using a discounted rate, you are able to find out how much they are worth today. Thus, DCF’s is a way to estimate the asset’s net present value (NPV). The discounting of cash flows does consider the effects of leveraging the investments through financing. The more financing, the less cash to be invested. DCF analysis also takes into consideration the time value for money, the occurrence of periodic cash flows and the ultimate resale of the property.

Net Yield Valuation:

The net yield valuation, serves as a key tool to estimate the value of a certain property investment by considering the net operating income (NOI) generated by the property and dividing it by a capitalization rate (Cap rate). The capitalization rate represents the yield of a property over a one-year time horizon, and indicates the expected return on investment for comparable properties within the market, providing a reliable basis for valuation. Cap rates, however, does not consider leverage, or the time value of money, and therefore should not be utilized as the sole indicator for the assessment of a certain investment opportunity. 

Capital Values:

Understanding that numerous factors influence the value of a property, we take into account crucial elements such as location, size, condition, amenities, infrastructure, and prevailing market conditions. Capital values reflect the expected price at which a property is likely to be bought or sold in the market. Our determination of capital values includes a detailed comparative market analysis. This process incorporates factors such as recent sales prices of similar properties, replacement cost considerations, income potential, and other relevant market data.

By employing these methods, at CG Capital Europe we ensure a comprehensive analysis and appraisal of real estate assets. Our expertise allows us to provide clients with accurate and insightful investment advice. Through the Discounted Cash Flow method, Net Yield Valuation, and Capital Values, we guarantee transparency in the market, so that our clients can confidently take sound and well-informed investment decisions.