What Is Cash Flow Before Tax (CFBT)?
NOI is the property’s income before financing. Cash Flow Before Tax (CFBT) is what the investor actually receives in their bank account after paying the lender.
NOI is the property’s income before financing. Cash Flow Before Tax (CFBT) is what the investor actually receives in their bank account after paying the lender.
The formula: CFBT = NOI − Annual Debt Service
Annual Debt Service is the total of all mortgage payments over the year: principal + interest. A $2,000,000 property financed at 7% over 25 years (30-year am) might carry annual debt service of ~$160,000. If the NOI is $200,000, CFBT = $40,000.
That $40,000 — on a $500,000 equity investment (25% down) — represents an 8% cash-on-cash return. Or it might not be enough to cover a major roof replacement. Context matters.
CFBT is important because NOI can look excellent while CFBT is negative. This happens when debt service exceeds NOI — called “negative leverage.” Aggressive financing (high loan amounts, high interest rates) can turn a solid property into a cash drain. This is why the Debt Service Coverage Ratio (DSCR), which you’ll learn in Module 3, exists: lenders require NOI to cover debt service by a safety margin before they’ll make the loan.
One critical point: CFBT does not account for taxes. It sits between property-level performance (NOI) and personal-level performance (after-tax cash flow). For most investors, CFBT is the practical “is this deal worthwhile?” number — the cash in hand before calling their accountant. (Real estate tax treatment is involved and case-specific; confirm your numbers with a CPA before relying on them.)
Learn this properly
CFBT is one of the core numbers in commercial real estate. The Language of CRE course teaches it alongside every other metric you need to read a deal, with worked examples and practice questions.
[Start with The Language of CRE ($49)](/courses/f2/) · [Open the CRE calculators](/cre-calculators/)
Common questions
What is Cash Flow Before Tax (CFBT)?
NOI is the property’s income before financing. Cash Flow Before Tax (CFBT) is what the investor actually receives in their bank account after paying the lender.
Why does CFBT matter in a commercial real estate deal?
The formula: CFBT = NOI − Annual Debt Service Annual Debt Service is the total of all mortgage payments over the year: principal + interest. A $2,000,000 property financed at 7% over 25 years (30year am) might carry annual debt service of ~$160,000.
Related terms
[Cash-on-Cash Return](/cash-on-cash-return/) · [Debt Service Coverage Ratio (DSCR)](/debt-service-coverage-ratio/)
Educational definition only. Not investment, financial, or brokerage advice.