[Verse 1] When you're looking at properties to buy or to hold There are numbers that tell the financial story told Net Operating Income is where we start our quest Revenue minus expenses, that's your NOI test [Chorus] Cap Rate shows you the return, NOI divided by the price FFO adds back depreciation, makes the numbers twice as nice AFFO takes it one step further, subtracts the capex spend These four metrics guide your way, on these you can depend [Verse 2] Capitalization Rate is yield without the debt NOI over purchase price, the return that you will get Six percent or eight percent, it helps you compare deals Higher cap rates mean more risk, but better income feels [Chorus] Cap Rate shows you the return, NOI divided by the price FFO adds back depreciation, makes the numbers twice as nice AFFO takes it one step further, subtracts the capex spend These four metrics guide your way, on these you can depend [Verse 3] Funds From Operations starts with net income as base Add depreciation back because it's just accounting space REITs report this number to show their cash flow might Since buildings don't really fall in value overnight [Bridge] But wait there's more to learn about AFFO makes it clear Subtract recurring capital costs To see cash flow sincere Maintenance and improvements That keep the buildings bright AFFO shows true cash available To pay investors right [Chorus] Cap Rate shows you the return, NOI divided by the price FFO adds back depreciation, makes the numbers twice as nice AFFO takes it one step further, subtracts the capex spend These four metrics guide your way, on these you can depend [Outro] NOI, Cap Rate, FFO, AFFO too Master these four metrics and real estate's clear to you
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