Real Estate Glossary

What's a Replacement Cost?

A replacement cost is the total amount of money needed to replace a given asset, in this case, property or any important housing area. It refers to how expensive it would be to replace the property if needed.

This is used to calculate its real market value and find the best insurance company for the property. However, this cost tends to fluctuate, as the market values aren't static.

It also can be used to calculate the net present value, which is used to determine whether the cost of replacing the asset is worth it.