Net Present Value Discount Rate

[Casey Williams]

Hello,

Newbie here that is just in the information gathering stage. I'm reading Frank Gallinelli's Cash Flow book and had a question about calculating the Net Present Value for future cash flow's. If I understand the concept of it, it's basically calculating a value of money today that all your future earnings would be worth to you now and using that value to justify a property's cost now. For instance, you have to discount all the future earnings at a certain rate, because if you had that money now, you could have put it to work for you now and received earnings.

Question is, how to you get a discount rate? Is that simply the Cap Rate for your area on similar properties? Or does it also need to include a portion for appreciation rates in your area? Coming up with a value for the discount rate is a little confusing to me. 

Thank you.

Casey