Cash flow after taxes isn't a difficult calculation. Once Cash Flow Before Taxes is determined, it's a simple matter to subtract tax liability to determine Cash Flow After Taxes. It's possible that, due to accrued losses deductible in later years, this after-tax cash flow could actually be a positive number and be higher than the cash flow before taxes.
Time Required: five minutes once you know the Cash Flow Before Taxes
- Determine the cash flow before taxes.
- Subtract the income tax liability, state and federal. The result is the Cash Flow After Taxes.
- Another method of calculating CFAT is: CFAT = Net Income + Depreciation + Amortization + Other Non-Cash Charges.
- They aren't that different, as you're just adding back cash items that were subtracted from the Cash Flow Before Taxes calculation. In the CFBT calculation, debt service is subtracted from Net Income, as it's a cash outflow. However, the depreciation and interest are both deductible for taxes and thus are added back to get the CFAT.
Government and Investors
Taxes are all about government, so let's talk about the various government housing and loan guarantee programs and their influence on the housing market
HUD, about this agency's mission: The U.S. Department of Housing and Urban Development's mission is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD is working to strengthen the housing market to bolster the economy and protect consumers; meet the need for quality, affordable rental homes; utilize housing as a platform for improving quality of life; build inclusive and sustainable communities free from discrimination; and transform the way HUD does business.
FHA insures mortgages: The Federal Housing Administration provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. FHA insures mortgages on single family and multifamily homes including manufactured homes and hospitals. It is the largest insurer of mortgages in the world, insuring over 34 million properties since its inception in 1934.
VA, Veterans Home Loans: VA helps service members, veterans, and eligible surviving spouses become homeowners. As part of their mission to serve, they provide a home loan guaranty benefit and other housing-related programs to help people buy, build, repair, retain, or adapt a home for personal occupancy. VA Home Loans are provided by private lenders, such as banks and mortgage companies. VA guarantees a portion of the loan, enabling the lender to provide more favorable terms.
FHFA, Federal Housing Finance Agency: FHFA's mission is to ensure the Housing Government-sponsored Enterprises operate in a safe and sound manner, so they serve as a reliable source of liquidity and funding for housing finance and community investment. Together these institutions provide more than $5 trillion in funding for the U.S. mortgage markets and financial institutions.
Fannie Mae HomePath Program: A foreclosed property can represent a great opportunity and a good value—but a HomePath property can offer even more. Some homes may qualify for special incentives, which will be clearly indicated on the property details page of an eligible property.
Freddie Mac guarantees home loans: Freddie Mac was chartered by congress in 1970 with a public mission to stabilize the nation's residential mortgage markets and expand opportunities for homeownership and affordable rental housing. Their statutory mission is to provide liquidity, stability, and affordability to the U.S. housing market.
Freddie Mac participates in the secondary mortgage market by purchasing mortgage loans and mortgage-related securities for investment and by issuing guaranteed mortgage-related securities, principally those they call PCs. The secondary mortgage market consists of institutions engaged in buying and selling mortgages in the form of whole loans (i.e., mortgages that have not been securitized) and mortgage-related securities. They do not lend money directly to homeowners.
You can see that there are a number of programs designed to facilitate home ownership.