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Commercial Real Estate Glossary



Cash flow

The net cash received in any period, taking into account net operating income, debt service, capital expenses, loan proceeds, sale revenues, and any other sources and uses of cash.

Cash flow after tax/es (CFAT)

For properties, it is the result of first calculating the net operating income, less mortgage and construction loan interest, less cost recovery for improvements and personal property, less amortization of loan points and leasing commissions to arrive at real estate taxable income. Next, real estate taxable income is multiplied by the applicable marginal tax rate to result in the tax liability (savings). Then, from the net operating income, annual debt service is subtracted to equal the cash flow before taxes (CFBT). Finally, the cash flow after taxes (CFAT) is calculated from the CFBT, less the tax liability (savings), plus investment tax credit. The Cash Flow Analysis Worksheet can be used to calculate a property’s gross operating income, net operating income, real estate taxable income and tax liability or (savings), CFBT, and CFAT.


Net operating income
– Interest
– Cost recovery
– Amortization of loan points
Real Estate taxable income
× Investor’s marginal tax rate
Tax liability (savings)
Net operating income
– Annual debt service
Cash flow before taxes
– Tax liability (savings)
Cash flow after taxes

Cash flow before tax/es (CFBT)

For properties, it is the result of calculating the effective rental income, plus other income not affected by vacancy, less total operating expenses, less annual debt service, funded reserves, leasing commissions, and capital additions. The Annual Property Operating Data form can be used to calculate a property’s effective rental income, gross operating income, total operating expenses, net operating income, and cash flow before taxes.

Cash flow model

The framework used to determine the cash flow from operations and the cash proceeds from sale.

Cash-on-cash rate

A return measure that is calculated as cash flow before taxes divided by the initial equity investment.

Cash proceeds from sale

The sales price less sales costs, mortgage balance, and tax liability on sale. Also known as sales proceeds after tax.

Central place theory

A location theory that accounts for the size, distribution, and organization of settlements, places, market areas, and establishments in a competitive and interdependent urban system, to explain differences in the locational tendencies and preferences of businesses as they seek to maximize market accessibility, sales, and profits.


See cash flow after tax.


See cash flow before tax.


An urban settlement or system containing various functions, agents, institutions, and components which interact and work together to satisfy the wants and needs of its inhabitants (as well as a portion of the population in surrounding rural areas).

Class life

The useful economic life of an asset set by the Internal Revenue Service.


Third stage of four-stage transaction management process pertaining to bringing the parties together and consummating an agreement. The acronym CLOSE represents the contingencies, legal instruments, obstacles, signatures, and execution involved in the close stage.

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