AFFO Calculator
Calculate Adjusted Funds From Operations for REIT and real estate analysis, from net income through FFO to a full AFFO per-share and payout picture.
| Line Item | Amount |
|---|---|
| Net Income | ₹5,00,00,000 |
| + Depreciation & Amortization | ₹3,50,00,000 |
| − Gain on Sale of Property | -₹40,00,000 |
| + Loss on Sale of Property | ₹5,00,000 |
| + Impairment Charges | ₹0 |
| = FFO | ₹8,15,00,000 |
| − Straight-Line Rent Adj. | -₹25,00,000 |
| + Stock-Based Compensation | ₹18,00,000 |
| + Amortization of Financing Costs | ₹9,00,000 |
| − Recurring CapEx | -₹60,00,000 |
| − Leasing Commissions & TI | -₹35,00,000 |
| +/− Other Adjustments | ₹0 |
| = AFFO | ₹7,22,00,000 |
FFO: ₹8,15,00,000 (₹1/share)
₹1/share · FFO was ₹8,15,00,000 (₹1/share)
83.3%
1.20x
20.14x
4.97%
Net Income → FFO → AFFO
Step-by-Step: From Net Income to AFFO
The exact math a REIT analyst runs, one step at a time.
Step 1: Start with Net Income and add back Depreciation & Amortization
Real estate depreciation is a large non-cash expense under GAAP that doesn't reflect actual cash flow, so it's added back first.
₹5,00,00,000 + ₹3,50,00,000 = ₹8,50,00,000Step 2: Remove gains, add back losses and impairments to get FFO
NAREIT's FFO definition excludes gains/losses on property sales and impairment write-downs, since these are one-time, non-operating items.
− ₹40,00,000 + ₹5,00,000 + ₹0 = FFO of ₹8,15,00,000Step 3: Subtract straight-line rent and recurring capital costs
Straight-line rent is accounting income not yet collected in cash. Recurring CapEx and leasing costs are real cash spent to keep the properties rent-ready.
₹8,15,00,000 − ₹25,00,000 − ₹60,00,000 − ₹35,00,000Step 4: Add back remaining non-cash items to arrive at AFFO
Stock-based compensation and amortization of financing costs are non-cash expenses added back, giving the true cash available for distribution.
+ ₹18,00,000 + ₹9,00,000 = AFFO of ₹7,22,00,000Step 5: Divide by diluted shares for per-share AFFO
AFFO per share is the figure most investors compare against the dividend per share and the share price.
₹7,22,00,000 ÷ 100000000 shares = ₹1 / share
AFFO:
₹7,22,00,000 (₹1/share)
AFFO Calculator: Adjusted Funds From Operations for REIT Analysis
If you follow real estate investment trusts, you've probably noticed something odd: REITs almost never report a profit that looks like their actual cash flow. Net income gets buried under a huge non-cash depreciation charge, which makes REIT earnings look worse than the real cash the business generates. That's exactly why the industry built two better metrics, FFO (Funds From Operations) and AFFO (Adjusted Funds From Operations), and why serious REIT investors barely glance at net income at all. This free AFFO calculator walks the full math for you, starting at net income, building up to FFO using the standard NAREIT definition, then working down to AFFO by removing recurring capital costs and non-cash accounting items, so you land on the number that actually reflects cash available for dividends.
This isn't a one-line calculator either. It's built the way an analyst actually works a REIT filing: enter net income and depreciation to get FFO, adjust for straight-line rent, capital expenditures, leasing costs, and stock compensation to get AFFO, then see AFFO per share, the AFFO payout ratio, dividend coverage, and a price-to-AFFO multiple, everything needed to judge whether a REIT's dividend is actually sustainable.
What Is AFFO (Adjusted Funds From Operations)?
AFFO is a REIT-specific measure of cash flow that starts from FFO and subtracts the ongoing capital spending a property needs just to keep functioning, along with removing a few remaining non-cash accounting distortions. In plain terms, it is the closest thing to true, distributable cash flow that a REIT generates in a given period, the number that actually determines whether a dividend is sustainable or is quietly being paid out of borrowed money or asset sales.
Unlike net income or even FFO, AFFO has no single official accounting definition, every REIT calculates it slightly differently in its own filings. But the core idea is consistent everywhere: take real cash-generating power, strip out accounting noise, and subtract the capital spending required to actually keep the cash flowing next year too.
FFO vs AFFO: What's the Difference?
FFO (Funds From Operations) is the first step, and it does have an official industry-standard definition from NAREIT (the National Association of Real Estate Investment Trusts): Net Income + Depreciation & Amortization − Gains on Property Sales + Losses on Property Sales + Impairment Charges. It exists because real estate depreciation under GAAP accounting is almost always overstated relative to how properties actually behave, well-maintained buildings often hold or gain value over time rather than steadily losing it, so adding depreciation back gives a truer earnings picture.
AFFO goes further. FFO still includes some non-cash items and completely ignores the real, recurring cash a REIT must spend on capital expenditures and leasing costs just to keep its buildings occupied and rent-ready. AFFO strips out straight-line rent adjustments, subtracts recurring capital expenditures and leasing commissions, and adds back a few more non-cash items like stock-based compensation. The result is consistently lower than FFO, and it's this lower, more conservative number that most analysts trust when judging dividend safety.
The AFFO Formula, Step by Step
Step one, get to FFO: FFO = Net Income + Depreciation & Amortization − Gains on Sale of Property + Losses on Sale of Property + Impairment Charges. Step two, get from FFO to AFFO: AFFO = FFO − Straight-Line Rent Adjustments + Stock-Based Compensation + Amortization of Financing Costs − Recurring CapEx − Leasing Commissions & Tenant Improvements +/− Other Non-Cash Adjustments.
Each of these adjustments exists for a specific reason. Straight-line rent recognizes rental income evenly over a lease term even when actual cash payments step up over time, so early in a lease, reported income is higher than cash collected, and that gap has to come back out. Recurring capital expenditures and leasing costs, on the other hand, are very real cash outflows that FFO ignores entirely, roofs, HVAC systems, parking lots, and tenant improvement allowances all cost real money to maintain a property's income-generating ability, and AFFO is the metric that finally accounts for them.
Why AFFO Matters More Than Net Income for REITs
REITs are legally required to distribute at least 90% of their taxable income to shareholders as dividends to maintain their REIT status, which is exactly why the dividend yield is usually the first thing investors look at. But taxable income and net income are shaped heavily by depreciation, a large non-cash charge, which means net income routinely understates a REIT's actual capacity to pay dividends, sometimes making a perfectly healthy REIT look like it's paying out more than it earns.
AFFO fixes that distortion by measuring real, distributable cash flow instead. It's the number REIT analysts actually use to judge whether a dividend is safely covered, whether there's room for future dividend growth, and whether a REIT's stock is fairly priced relative to the cash it generates, none of which net income alone can reliably answer.
AFFO Per Share and the AFFO Payout Ratio
AFFO per share is simply total AFFO divided by diluted shares outstanding, the REIT equivalent of earnings per share, but built on real cash flow instead of accounting income. It's the figure most directly comparable to the dividend per share a REIT actually pays out.
The AFFO payout ratio takes that comparison a step further: Dividend Per Share ÷ AFFO Per Share × 100. A payout ratio comfortably under 100%, commonly in the 70% to 90% range for healthy REITs, suggests the dividend is well covered by real cash flow with room to spare. A ratio pushing toward or past 100% is a warning sign, it suggests the REIT may be funding its dividend from debt, asset sales, or share issuance rather than from operating cash flow, which is rarely sustainable for long.
Price-to-AFFO and AFFO Yield: Valuing a REIT
Just as stock investors use the price-to-earnings ratio to value regular companies, REIT investors use price-to-AFFO, share price divided by AFFO per share, to judge whether a REIT is cheap or expensive relative to its cash flow. A lower multiple can suggest a REIT is undervalued relative to peers, or it can reflect real risk the market is pricing in, so this number is best used to compare similar REITs against each other rather than in isolation.
AFFO yield flips that same relationship around: AFFO Per Share ÷ Share Price × 100, giving a cash-flow yield directly comparable to a bond yield or a dividend yield. A REIT trading at an 8% AFFO yield is generating meaningfully more cash flow per dollar invested than one trading at a 4% yield, all else being equal, a genuinely useful comparison point across the sector.
Dividend Coverage: Is the REIT's Payout Actually Safe?
Dividend coverage, calculated as total AFFO divided by total dividends paid, answers a simple but important question: for every dollar paid out in dividends, how many dollars of real cash flow backed it up? A coverage ratio above 1.0x means the REIT generated more cash than it distributed, comfortably safe. A ratio below 1.0x means the dividend exceeded AFFO for the period, which isn't necessarily an immediate crisis, but is worth watching closely if it persists across multiple quarters.
This calculator computes dividend coverage automatically from your AFFO and total dividend inputs, turning a metric that normally requires digging through a REIT's cash flow statement into a single number you can check in seconds.
A Simple Worked Example
Picture a REIT reporting 50 million dollars in net income, with 35 million dollars in depreciation and amortization, a 4 million dollar gain on a property sale, and a 500,000 dollar loss on another. FFO comes to 50,000,000 + 35,000,000 − 4,000,000 + 500,000, which equals 81,500,000 dollars, already a far more realistic cash-flow figure than net income alone.
From there, subtract 2.5 million dollars in straight-line rent adjustments, 6 million in recurring capital expenditures, and 3.5 million in leasing commissions and tenant improvements, then add back 1.8 million in stock-based compensation and 900,000 in amortized financing costs. AFFO lands at roughly 71.7 million dollars, meaningfully lower than FFO, but a genuinely trustworthy figure for judging whether the REIT's dividend is sustainable.
Common Mistakes When Calculating AFFO
The most frequent mistake is stopping the analysis at FFO and treating it as if it were the final answer, FFO still contains straight-line rent noise and completely ignores real capital spending, so it consistently overstates a REIT's true distributable cash flow. Another common error is using total capital expenditures instead of only recurring, maintenance-type capex, one-time development or acquisition-related capex belongs in a different bucket entirely and shouldn't drag down the AFFO of an otherwise healthy, stabilized portfolio.
It's also worth remembering that because AFFO has no single official definition, comparing AFFO figures directly across two different REITs' own reported numbers can be misleading if their methodologies differ. Running the same standardized formula through one calculator, exactly what this tool does, gives you an apples-to-apples comparison that a REIT's self-reported figure alone can't guarantee.
Frequently Asked Questions
What is AFFO in REIT analysis?
AFFO stands for Adjusted Funds From Operations, a measure of a REIT's true, distributable cash flow. It starts with FFO and subtracts recurring capital expenditures, leasing costs, and non-cash rent adjustments, giving the closest available estimate of cash actually available to pay dividends.
What is the difference between FFO and AFFO?
FFO (Funds From Operations) adds depreciation, amortization, and impairments back to net income and removes property sale gains/losses, using NAREIT's standard formula. AFFO goes further by also subtracting recurring capital expenditures, leasing costs, and straight-line rent adjustments, making it a more conservative, cash-focused measure than FFO.
How do you calculate AFFO?
First calculate FFO: Net Income + Depreciation & Amortization − Gains on Property Sales + Losses on Property Sales + Impairment Charges. Then calculate AFFO: FFO − Straight-Line Rent Adjustments + Stock-Based Compensation + Amortization of Financing Costs − Recurring CapEx − Leasing Commissions & Tenant Improvements.
Why do REITs use AFFO instead of net income?
REIT net income is heavily reduced by depreciation, a large non-cash accounting charge that often overstates how much value a well-maintained property actually loses. AFFO removes that distortion and other non-cash items, giving a truer picture of the cash flow available to fund dividends.
What is a good AFFO payout ratio?
A payout ratio (dividends per share ÷ AFFO per share) in the roughly 70% to 90% range is generally considered healthy, leaving a cash cushion. A ratio near or above 100% suggests the dividend may not be fully covered by real cash flow, a warning sign worth investigating further.
What does price-to-AFFO tell you?
Price-to-AFFO (share price ÷ AFFO per share) is the REIT equivalent of a price-to-earnings ratio, showing how expensive a REIT's stock is relative to its real cash flow. It's most useful when comparing similar REITs against each other rather than viewed alone.
What is dividend coverage in REIT analysis?
Dividend coverage is total AFFO divided by total dividends paid. A ratio above 1.0x means the REIT generated more cash than it paid out in dividends, which is generally considered a safe, sustainable level.
Is AFFO the same for every REIT?
No. Unlike FFO, which follows a standard NAREIT definition, AFFO has no single official formula, and REITs may calculate it slightly differently in their own reports. Using one consistent formula, like this calculator's, allows for a fairer, apples-to-apples comparison across different REITs.