Real estate is depreciated on paper while properties often gain value, so REIT net income understates cash earnings. FFO (defined by Nareit) adds depreciation back; AFFO goes further by deducting the money really needed to maintain the properties, giving a better measure of dividend-paying capacity.
How to use the AFFO Calculator – Adjusted Funds From Operations
- Net income
- Depreciation and amortisation
- Losses from property sales
- Gains from property sales
- Straight-line rent adjustment
- Recurring capital expenditures
- Routine maintenance
- Shares outstanding
- Dividend per share
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter net income, depreciation, gains and losses on property sales, rent adjustments, capital expenditure and maintenance, and shares outstanding.
Tips
- Get a written loan estimate and compare the APR, not just the interest rate.
- Include property tax, insurance, HOA fees and maintenance in your monthly budget.
- A larger down payment lowers the payment and can remove mortgage insurance.
- Rates change daily – use a current quote for the most accurate result.
Common mistakes to avoid
- Looking only at the monthly payment instead of the total cost of the loan.
- Forgetting closing costs and fees.
- Assuming home prices always rise.
Inputs explained
| Field | What to enter |
|---|---|
| Net income | Amount in your currency |
| Depreciation and amortisation | Amount in your currency |
| Losses from property sales | Amount in your currency |
| Gains from property sales | Amount in your currency |
| Straight-line rent adjustment | Amount in your currency |
| Recurring capital expenditures | Amount in your currency |
| Routine maintenance | Amount in your currency |
| Shares outstanding | A number |
| Dividend per share | Amount in your currency |
What each result means
- Funds from operations (FFO) = [Net income] + [Depreciation and amortisation] + [Losses from property sales] – [Gains from property sales]
- Adjusted funds from operations (AFFO) = [Funds from operations (FFO)] – [Straight-line rent adjustment] – [Recurring capital expenditures] – [Routine maintenance]
- AFFO per share = [Adjusted funds from operations (AFFO)]÷[Shares outstanding]
- AFFO payout ratio = [Dividend per share]÷[AFFO per share]×100
Example values
How the main result changes when Net income changes and everything else stays at the example values above:
| Net income | Adjusted funds from operations (AFFO) |
|---|---|
| 60,000,000 | 109,000,000 |
| 90,000,000 | 139,000,000 |
| 120,000,000 | 169,000,000 |
| 150,000,000 | 199,000,000 |
| 180,000,000 | 229,000,000 |
| 240,000,000 | 289,000,000 |
Formula
FFO = net income + depreciation and amortisation + losses on property sales − gains on property salesAFFO = FFO − straight-line rent adjustment − recurring capex and maintenanceAFFO per share = AFFO ÷ sharesWorked example
Inputs — Net income: $120,000,000; Depreciation and amortisation: $90,000,000; Losses from property sales: $2,000,000; Gains from property sales: $15,000,000; Straight-line rent adjustment: $6,000,000; Recurring capital expenditures: $18,000,000; Routine maintenance: $4,000,000; Shares outstanding: 80,000,000; Dividend per share: $1.8.
Results — Funds from operations (FFO) = $197,000,000.00; Adjusted funds from operations (AFFO) = $169,000,000.00; AFFO per share = $2.11; AFFO payout ratio = 85.21 %.
Frequently asked questions
What is AFFO?
FFO adjusted for recurring capital spending and non-cash rent – a REIT's sustainable cash earnings.
Why not use net income for REITs?
Depreciation makes net income understate cash flow.
What is a healthy AFFO payout ratio?
Below about 85–90% leaves a margin of safety for the dividend.
What formula does the AFFO Calculator – Adjusted Funds From Operations use?
FFO = net income + depreciation and amortisation + losses on property sales − gains on property sales.