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FFO Calculator
Calculate Funds From Operations and AFFO for any REIT. FFO = Net Income + D&A − Gains on Property Sales. Add shares and price to see FFO yield benchmarked against the REIT's property sector.
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FFO
$550M
Funds From Operations
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Formula
FFO = Net Income + D&A − Gains on Property Sales
Net Income$300M
+ Depreciation & Amortization$250M
− Gains on Property Sales$0M
FFO$550M
FFO adds back real estate depreciation, which overstates expenses for property owners. It is the REIT equivalent of earnings.
FFO yield benchmarks by REIT type
Typical FFO yield ranges by property sector. Retail and office REITs carry higher yields to compensate for cash-flow risk; industrial and residential REITs trade at lower yields on steadier demand.
| REIT Type | Typical FFO Yield Range |
|---|---|
| Office REITs | 6–9% |
| Retail REITs | 7–11% |
| Industrial REITs | 4–7% |
| Residential REITs | 4–6% |
| Healthcare REITs | 5–8% |
| Diversified REITs | 6–9% |
Verdict thresholds: Attractive = FFO yield ≥ range high · Fair = within range · Premium = below range low · Negative FFO = FFO ≤ 0
Understanding FFO
Why net income misleads for REITs
GAAP net income for a REIT is dragged down by huge non-cash depreciation charges on buildings. But well-maintained real estate usually holds or gains value over time — the opposite of what the depreciation schedule implies.
FFO strips that distortion out by adding depreciation and amortization back and removing one-off gains on property sales. The result is a cleaner read on the recurring cash the portfolio actually produces.
FFO vs. AFFO
FFO still ignores the capital a REIT must spend every year to keep its buildings competitive — new roofs, tenant improvements, leasing commissions. AFFO (Adjusted FFO) subtracts that recurring maintenance capex.
AFFO is the stricter number and the one most analysts use to judge whether a distribution is truly covered. If the dividend exceeds AFFO, the REIT is funding payouts with debt or new equity — rarely sustainable.
Reading the FFO yield
FFO yield is FFO per share divided by the share price. Like an earnings yield, it frames the return you are buying. A 7% FFO yield means the portfolio generated $7 of funds from operations for every $100 of share price.
Compare it to the typical range for the property sector — office, retail, industrial, residential, healthcare — rather than to an absolute number. A high yield can mean a bargain or a market pricing in trouble.
Where FFO falls short
FFO is a single-period figure, so it reflects acquisition timing, one-off leasing, and occupancy swings. It also adds back all depreciation, even on short-lived assets that genuinely wear out.
Use FFO as the starting point, confirm distribution safety with AFFO, and read the multi-year trend before acting. For a full valuation, pair it with a DCF model or dividend yield check.
How to use this calculator
Enter net income and D&A
Pull net income and real-estate depreciation & amortization from the REIT's income statement, in millions. These two inputs produce FFO.
Add gains and capex
Subtract one-time gains on property sales, then add maintenance capex to compute AFFO — the stricter, distribution-ready cash figure.
Enter shares and price
Add diluted shares outstanding and the current price to see FFO per share and the FFO yield you are buying.
Check the sector benchmark
Pick the REIT type to compare the FFO yield against its property-sector range and read the sustainability verdict.
Frequently asked questions
What is FFO?
FFO (Funds From Operations) is net income with real-estate depreciation and amortization added back and one-time gains on property sales removed. It is the REIT equivalent of earnings and a better gauge of recurring cash performance than GAAP net income.
How do you calculate FFO?
FFO = Net Income + Depreciation & Amortization − Gains on Property Sales. All figures come straight from the income statement and cash-flow statement.
What is the difference between FFO and AFFO?
AFFO (Adjusted FFO) takes FFO and subtracts recurring maintenance capital expenditures. It is the stricter measure analysts use to judge whether a REIT's distribution is actually covered by cash.
What is a good FFO yield?
It varies by sector: industrial and residential REITs typically yield 4–7% on FFO, while retail REITs run 7–11%. Compare a REIT's FFO yield to its property-sector range rather than to a single absolute number.
Why do REITs use FFO instead of EPS?
Buildings generate large non-cash depreciation charges that crush GAAP earnings even when property values are stable or rising. FFO removes that distortion, so it reflects the cash a REIT can actually distribute far more accurately than EPS.
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