What is the difference between Layer method and discounted cash flow method in valuation of real estate.
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The layer method is a type of DCF method in valuation of real estate. It divides the extra rent over the base one and separately values the same. What I mean is, suppose, currently, the amount of rent is 300000 and in two years, it’ll be revised up t0 370000. So, in 370000, there is a 300000 ( Bottom Slice) and an extra 70000 ( Top Slice). It values both the slices separately. Refer to Example 18 and 19 of the Core Readings, for a better grip on both the DCF variations : Term and Reversion Method and the Layer Method.