We are looking at purchasing a multi-family development in Dallas and are trying to determine how much we are willing to pay to acquire the property. Should we be relying more on the capitalization rate or the capital extraction method to determine the property’s value?
Answers
On
Mark Drumm answered:
The capitalization rate method only takes a look at value at a specific point in time. A better measure is a discounted cash flow method, which takes into account the future cash flows, discounted, but it has the risk in making assumptions about an anticipated growth rate.