Table of contents

Real estate valuation refers to the set of methods used to determine the value of an asset. The result of a valuation varies significantly depending on the method and assumptions used. It is really hard to take into account all specific parameters of property valuation in a single tool, which makes it an interesting challenge for financial modelers. When F31’s clients discuss their internally developed tools with us, the term “usine à gaz” (a French phrase meaning an overly complicated or convoluted system) is often mentioned.


In the realm of real estate valuation, it’s common for experts to disagree on the value of an asset. Each expert tends to have their own point of view. Therefore, the structure of a financial model must be flexible enough to allow the expert-user to easily adapt the assumptions and valuation techniques to reflect their specific perspective.


After studying various valuation theories and practices used by experts in France, we’ve developed a simple approach to creating an ergonomic, flexible, and scalable model.

  • In this section, we will address the following questions:
  • What criteria guide the choice of valuation method?
  • What do “Term & Reversion” and “Hard Core & Top Slice” mean?
  • What is the difference between the capitalisation rate and the rate of return?
  • What type of surface area should be considered in residential property valuation?
  • How do you build a DCF (Discounted Cash Flow) model for a multi-asset property?
  • What is the difference between Value excluding registration fees and Value including registration fees?

The 3 Property Valuation Methods

There are three common methods used in real estate valuation practice:

  • Comparison
  • Capitalization/Return
  • Discounted Cash Flow (DCF)

To determine the market value of an asset, valuers often calculate the arithmetic mean of the results obtained using these different methods.

Now, let’s take a closer look at each of these methods.