What do appraisers typically use to determine reversion in property valuation?

Appraisers commonly utilize discounted cash flow analysis to determine reversion in property valuation because this method effectively accounts for the time value of money by discounting future cash flows back to their present value. In real estate valuation, the concept of reversion refers to the estimated future sale price of a property at the end of a holding period, or at the end of the projected income-generating life of the asset.

By incorporating expected future cash inflows, including rental income and the anticipated future reversion value, the discounted cash flow analysis provides a comprehensive view of the property's potential financial performance over time. This analysis allows appraisers to assess the total expected return on investment, taking into consideration not just the income generated during the holding period but also the ultimate value retrieved upon sale.

This approach is particularly advantageous because it captures both rental income and any expected appreciation or change in property value, making it essential for a thorough valuation process.