Novice with a question about Cash Flow

Hi all,
I am soo happy that I found this site by accident. It seemes REALLY helpful. I did a search on my question but turned up no resuts. My father, sister, and I are all interested in jumping in the game. We are primarily interested in Commercial real estate, my father only being interested in 15+units as he feel that they are more likely to pay for themselves. My only concern is cashflow as I do not intend on flipping properties. I just want a steady source of income. Being 21 I am attempting to retire early and live of of cashflow. My question is after searching on loopnet for quite some time, I keep noticing a figure which is pre tax cashflow. Does this mean how much cashflow for the year that is eligible for taxes? I thought the yearly income was eligible for taxes.

An example is Income being $112,000 for the year but pre tax cash flow being $23,000. Which number is the taxable figure? My PRIMARY concern about commercial investment is taxes as I am afraid of big brother.
Any help would be appreciated. Thanks in advance.

Loopnet usually refers to income as revenue from the rent rolls minus the expenses of the property (insurance, water, management, etc.). Unless you are paying cash for the property you will incur a cost for debt service (mortgage). Sometime they will guess what a typical mortgage balance/payment would be for the deal and the pre-tax cashflow is what is left over. It is call pre-tax because they do not know what your particular tax bracket is going to be.

Talk to your accountant. Don’t be scared. There are a ton of tax benefits for owning property.

anthony,

I am NOT an accountant, but have studied and invested some in multi family.

Pre tax cashflow is the income minus the expenses. Check the expenses thoroughly, as most sellers stretch everything they can. The net is what is going to be taxed as income. However, there is also a thing called depreciation of the asset, which on the books is an expense. Sometimes that can offset all the income for tax purposes, yet it is not a cash expense for you. Therefore I put cash in my pockets and it is not taxed. On one investment I am in, we will are looking at 7-10% cash on cash, and all of it will be offset for the first 8 yrs, so no tax paid.

As mentioned, talk to an accountant, your situation is unique to you and mine to me. Just a taste of what can be done.

Luck to you, and remember: check everything they tell you. Verify, verify, verify.

DB