How do I calculate a apartment building investment cash flow after taxes or before taxes?

April 6th, 2009 by admin

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boss asked:


I am going to invest in a apartment building using a loan.
Is it the noi-annual debt service-annual mortgage payments-the annual loan paybacks-income taxes?
If this isn’t right, then please provide the proper way of determining my actual annual profit after taxes or pre-tax.

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One Response to “How do I calculate a apartment building investment cash flow after taxes or before taxes?”

  1. Try Our Income Tax Refund Calculator Free says:
    April 8, 2009 at 4:14 pm

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    You need to calculate the after-tax rental income first, then after tax cash flow second.

    First after-tax income from the property.
    Income
    a) gross income from the rentals

    Expenses
    b) mortgage interest
    c) depreciation (assume 80% of the purchase price is depreciable building, thus annual depreciation is purchase price * 80% / 27.5 years or about 2.9% of the purchase price)
    d) real estate taxes
    e) rent loss due to vacancy, tenant
    f) management fee
    g) maintenance fee
    h) insurance

    Income - expense would give you roughtly taxable rental income from the property.

    Assuming the rental bldg generates a (paper) loss, you can apply it towards your personal ordinary income and use it to reduce your ordinary income.

    If you show a rental profit, then you would have to pay at your marginal tax rate.

    Cash Flow:

    Annual Rental income - annual mortgage payment -/+ tax liability or tax benefit from owning this property.

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