What Is FFO?

Also written as: FFO

FFO is a standard REIT profitability metric that adds depreciation and amortization back to net income and removes gains or losses from property sales — designed to better reflect real estate cash flow than GAAP net income, since real estate depreciation rarely matches actual value decline.

Most useful for: Real Estate Investor · Commercial Investor
F
At a Glance
FFO
FFO=Net Income+Depreciation & Amortization−Gains on Property Sales

Formula

FFO = Net Income + Depreciation & Amortization − Gains on Property Sales

FFO vs. AFFO

FFO

Funds From Operations — net income with real estate depreciation and property-sale gains/losses added back or removed, a REIT-standard profitability measure.

AFFO

Adjusted Funds From Operations — FFO further reduced by recurring capital expenditures and leasing costs, meant to approximate actual distributable cash flow.

AFFO is generally considered the better gauge of whether a REIT's dividend is sustainable, since it accounts for the ongoing capital spending real estate requires.

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This definition is provided for general educational purposes and is not financial, legal, tax, or real estate advice. Verify important decisions with appropriately qualified professionals.

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