Can it be thought of as: NOI(1-t) + depreciation - principal payments
The way I calculate it is. NOI - Depreciation - Mortgage Payment X 1-T = X X + Depreciation - Principal - Mortgage = After tax cash flow… I learned this recently so I’m not 100% sure.
if asked to calculate NOI, which of the following do you NOT subtract? - interest expense - financing cost - depreciation
Financing cost and depreciation. I hope you’re correcting me if I’m wrong 
Financing costs are not deducted in arriving to NOI (Net OPERATING Income): NOI=Revenue - Insurance-Taxes (like state taxes on the property)-Utilities-Maintenance-Repairs- Vacancy - Collection costs, the formula depends on what type of asset you have, From NOI deduct depreciation and only interest expense because interest expense is tax deductible (principal repayment is not), apply taxes and you get the after tax net income. To get the cash flow (which is a sort of free cash flow) add back depreciation, and deduct the principal repayment, and end up with the cash flow.
Oops. Arggh… i need to rest.
map1 Wrote: ------------------------------------------------------- > Financing costs are not deducted in arriving to > NOI (Net OPERATING Income): > > NOI=Revenue - Insurance-Taxes (like state taxes on > the property)-Utilities-Maintenance-Repairs- > Vacancy - Collection costs, the formula depends on > what type of asset you have, > > From NOI deduct depreciation and only interest > expense because interest expense is tax deductible > (principal repayment is not), apply taxes and you > get the after tax net income. > > To get the cash flow (which is a sort of free cash > flow) add back depreciation, and deduct the > principal repayment, and end up with the cash > flow. tremendous help, thank you
interest is the same thing as financing cost right?
yes, but be careful, debt service is both principal and interest.
right, but if one of the items said “interest cost” or “interest expense” or “financing cost”–all of these would not be subtracted, right?
I think all three are in fact what we usually name interest expense. Don’t deduct when calculating NOI. Deduct when calculating after tax cash flow.
well i think what you mean is: dont deduct when calculating NOI deduct from NOI when calculating after tax income then add back when calculating after tax cash flow. do i have that down?
no, dont add back…the only thing you would add back is depreciation you would also subtract principal portion of the mortgage payment. this will give you your aftertax cashflow
yep got thatm thanks