Definition of Terms – Cash Flow Analysis

Following is an explanation of the terms as shown on the “cash flow analysis” statements that may help
you in your decision to buy a particular property:

Gross Scheduled Income (GSI):

Income building would receive if fully rented 100% of the time.

Vacancy Factor:

Percent per year units are vacant. This figure can vary up or down depending on market conditions and management.

Gross Operating Income:

What is left after vacancies.

Annual Operating expenses:

Total expenses which include real estate taxes, insurance, gardener, management, repairs, reserves for repairs/improvements and utilities.

Net Operating Income (NOI):

Amount left after vacancies and expenses.

Interest Deduction and Depreciation:

Interest deducted as result of mortgage and depreciation (writing off the building/paper loss).

Before Tax Cashflow (CASH ON CASH):

Cashflow after you deduct Mortgage payments from net operating income. (can be a positive or negative number) Also known as “net spendable income” or “cash on cash return”. To figure cash on cash return as a percentile, divide before tax cashflow by the amount of the downpayment.

After Tax Cashflow:

Cashflow received after you add the “before tax cashflow” and the amount of money you would get back from the government (taxes saved for the year against other income) from the taxes you would not have to otherwise pay because you had this investment. SEE YOUR ACCOUNTANT REGARDING THIS NUMBER.