Real estate forecasting: The Cash Flow Statement. In real estate investing, the focus is primarily on the cash flows generated by the property. We begin with the rental revenues, which in general are a function of the property size and market rent. Factors such as expected vacancy, rent credits and credit issues related to non-paying of rent will be considered later. We then add the income generated by the ancillary services such as parking, laundry, storage, et cetera. Operating expenses are deducted next, and if the operating expenses are all paid by the tenants as in a triple net lease, they will be offset by a line called reimbursable expenses. These expenses are generally the taxes insurance, maintenance, security, janitorial and other general operating expenses including the cost to manage the building. The net of these building related revenues and expenses is referred to as net operating income or NOI. NOI is often used in determining the value of a building. Larger expenditures to improve or maintain the building are capital expenditures and these are deducted after NOI. The net of NOI and Capex is critical to determining whether a property's cash flows are substantial enough to service the debt. This is called unlevered cash flow as it represents the cash available to both the debt and equity stakeholders. Once the debt service is deducted from the cash flow, we arrive at the residual cash flow to equity investors often called the levered cash flow. Note, there's no real need to forecast a balance sheet since we're only dealing with one asset.