I was wondering why you did not account for income tax in the NPV calculation of cashflows to be discounted? I have noticed you have before in the acquisition model.
Is there a reason you wouldn’t take taxes into consideration? I am learning and curious why this is the case (I studied finance at uni so I understand that the typical DCF model would look at after tax cashflow)
Great question. In the United States at least, it is common practice to perform all projections on a before-tax basis. This is because no two real estate investors’ tax situation is the same, and so to properly make apples-to-apples comparisons we look at opportunites pre-tax. This is also why when using PV to value real estate, it is done on unlevered cash flows. Because no two investors’ financing structures are exactly the same.
With all of that said. We have included a basic ‘After-Tax’ returns module in the All-in-One. It’s not great, but for those who want to try to estimate returns post-tax, it’s there.
