The discounted cash flow (DCF) method is a dynamic calculation method modelling the income stream of a property over a period of (usually) 5-10 years offset against any costs. Earnings are discounted to a present value.

This method is particularly effective in illustrating changes in rents, for example on initial letting or following a major renovation. In such instances the direct capitalization method is less appropriate, because it assumes stable income streams and cost parameters. 

The method is interesting, especially when calculating returns (IRR - Internal Rate of Return) on investments with periodic negative earnings phases (e.g. as a result of building work and vacant periods).