Final answer:
BTCF is a better measure of investor cash flow than NOI because it considers all cash expenses and inflows, including taxes, principal payments, and non-cash expenses like depreciation and amortization.
Step-by-step explanation:
When evaluating the cash flow of an investment, it is important to consider the timing and amount of cash that is available to investors. Net Operating Income (NOI) measures the profitability of a property by subtracting operating expenses from rental income. However, NOI does not take into account non-cash expenses such as depreciation and amortization. On the other hand, BTCF (Before Tax Cash Flow) provides a more accurate measure of an investor's cash flow as it considers all cash expenses and inflows, including taxes, principal payments, and non-cash expenses like depreciation and amortization.
For example, let's say a property generates $100,000 in rental income per year and has $20,000 in operating expenses, resulting in a NOI of $80,000. However, if the property also has $10,000 in non-cash expenses like depreciation, the BTCF would be $90,000 ($80,000 + $10,000). This additional $10,000 reflects the cash flow available to the investor.
Therefore, BTCF is a better measure of investor cash flow than NOI because it provides a more comprehensive picture of the cash generated by the investment.