Cash Flow
Analysis

The assignment projects a property's income, operating expenses, capital expenditures, and debt service to model cash flows over a stated period. The analysis makes explicit the assumptions about rents, vacancy, expense growth, reserves, and financing, so the cash-flow projection can be tested against changing assumptions. The deliverable is a written analysis documenting the inputs, assumptions, and projected cash flows.

Owners, investors, and lenders use cash-flow analysis to evaluate an acquisition, monitor a holding, or test financing assumptions. For example, an investor evaluating an office acquisition may want to see projected cash flows under stated rent and expense assumptions. The depth and period depend on the question; confirm with the intended user what assumptions and horizon to model.

The analysis considers the rent roll and lease terms, vacancy and credit loss, operating expenses and their growth, reserves and capital expenditures, financing assumptions, and the projection horizon. The conclusion is a set of projected cash flows tied to the stated assumptions; it is sensitive to changes in any of them. A cash-flow analysis is not the same as a value appraisal, though it can inform one.

We begin by discussing the property and the question to confirm the assumptions and projection horizon. After agreeing on scope, we collect income and expense information, build the cash-flow projection with stated assumptions, and deliver a written analysis documenting the inputs and conclusions. Scope, fees, and timing depend on the property and the complexity of the projections.