AFFO Calculator — Adjusted Funds From Operations (REIT)

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How this is calculated

Real estate investment trusts (REITs) own income-producing property. GAAP net income understates cash generation because depreciation — a large non-cash charge that writes down the value of real estate — reduces reported earnings even as properties often appreciate in value. Funds From Operations (FFO) corrects this by adding back depreciation and amortization and removing one-time gains from property disposals, giving a cleaner view of recurring operating cash generation.

AFFO goes further than FFO by deducting maintenance capital expenditures — the cash actually needed to keep properties in rentable condition — and adding back non-cash accounting items like straight-line rent adjustments (which spread rent escalations evenly over a lease period, creating a gap between reported and actual cash rent) and non-cash stock-based compensation. The result is the closest single metric to the true recurring free cash flow available to REIT shareholders and the amount that sustainably funds dividends.

AFFO per share is AFFO divided by shares outstanding, and the P/AFFO multiple (stock price ÷ AFFO per share) plays the role for REITs that the P/E ratio plays for regular companies. A P/AFFO below 15x is often considered cheap relative to history, though valuations vary widely by property sector and interest-rate environment. Note that AFFO is not a standardised GAAP metric — different analysts may include or exclude different line items, so always check the definition used when comparing across companies.