Question : How do I calculate a apartment building investment cash flow after taxes or before taxes?
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.
apartment building loans

Best answer:

Answer by fn0384
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.