Cash Flow (CFBT and CFAT)

Cash flow is probably the first term which real estate investors learn in property analysis. It simply represents all the inflows and outflows of cash for a certain property. Next to appreciation and tax shelter, it is one of the most important Real Estate investment returns. Cash flow is not affected by a depreciation deduction since it is not a cash item. However it is affected not only by the interest portion but by the entire amount of the mortgage payment. All the capital additions or improvements paid during the year have to be subtracted from the total incomes and therefore lower the Cash Flow.

It is possible to calculate cash flow before taxes (CFBT), which is used more often or cash flow after taxes (CFAT) which is CFBT minus any tax liability arising from the operation of the property.

Cash flow simply represents all the inflows and outflows of cash for a certain property. Next to appreciation and tax shelter, it is one of the most important Real Estate investment returns. Cash flow is not affected by a depreciation deduction since it is not a cash item. However it is affected not only by the interest portion but by the entire amount of the mortgage payment. All the capital additions or improvements paid during the year have to be subtracted from the total incomes and therefore lower the Cash Flow. It is possible to calculate cash flow before taxes (CFBT), which is used more often or cash flow after taxes (CFAT) which is CFBT minus any tax liability arising from the operation of the property.

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