2008200920102011201220132014201520162017
The numbers below are from the current analysis. Ratios do not take into account all of the cash flows, and are not a discounted cash flow measure like NPV, hence do not reflect the true yield for the analysis. Cash flows with the * symbol are partial years where the partial number has been divided by the number of months and multipled by 12.
Net Operating Cash Flow\$45,598\$74,998\$56,044\$67,826\$79,899\$56,408\$115,252\$109,369\$135,859\$145,934
Taxes Due (- = Savings)\$16,815\$28,712\$20,772\$25,806\$33,368\$23,967\$49,015\$47,413\$59,554\$73,397
Less: Loan Repayment\$2,136,745\$2,086,776\$2,115,125\$2,054,140\$1,988,093\$1,916,564\$1,839,099\$1,755,204\$1,664,346\$1,565,946
Sale Value\$3,653,530\$3,817,604\$3,697,709\$3,848,621\$3,554,991\$4,290,542\$4,217,004\$4,548,131\$4,674,070\$4,106,106
- Taxes Due (- = Savings)\$16,815\$28,712\$20,772\$25,806\$33,368\$23,967\$49,015\$47,413\$59,554\$73,397
/ Initial Downpayment + Closing Costs + Loan PointsUse \$766,271 for all years.
= Accounting RoR Before Tax0034.97%0115.75%7.87%69.2%42.57%00

How is the Accounting Rate of Return After Tax calculated?

Net Operating Cash Flow (ie Year 1)
- Taxes Due (ie Year 1)
+ Equity Buildup (ie Loan Repayment Year 1 - Year 2)
+ Appreciation (ie Sale Value Year 2 - Year 1)
/ Initial Equity
= Accounting Rate of Return Before Tax as %
so \$400,000 / \$1,000,000 = 40%

Considers:
• Price, Original Loan Amount, Scheduled Income (Current Year Only), Debt Payment (Current Year Only), Vacancies (Current Year Only), Expenses (Current Year Only), Taxes (Current Year Only), Sale Proceeds Increase (Current Year Only)
Ignores:
• Other Years NOI, Other Years Sale Proceeds

... and a lot of other things
Why is Accounting Rate of Return After Tax useful?

Accounting Rate of Return is not commonly used in commercial real estate analysis. It is a Return on Investment (ROI) type ratio where the cash flow is divided by an investment. The ratio is basically just like the Cash on Cash ratio with the one year's rise of sale value and decrease in loan principal added to the cash flow side of the ratio. This ratio can, therefore, increase the understanding of the Cash on Cash ratio.

What is the Accounting Rate of Return After Tax Sensitive to:

Scheduled Income (Current Year Only), Debt Payment (Current Year Only), Vacancies (Current Year Only), Expenses (Current Year Only), Taxes (Current Year Only), Sale Proceeds Increase (Current Year Only)