Real Estate Financial

Modeling – Introduction
and Overview
Would You Like a Parking Lot with Your
Condo?
Lesson Outline
• Topic #1: What This Course Covers

• Topic #2: What This Course Does NOT Cover

• Topic #3: Different Property Types and Strategies

• Topic #4: How to Use This Course

What This Course Covers
• Two Main Topics: Individual properties and REITs (real estate
investment trusts)

• CRE / Private Equity / Lending: Individual properties more relevant

• Investment Banking: REIT lessons more relevant

• GOAL: Prepare you efficiently for Excel-based case studies and

interviews, and get you up to speed on the job quickly

• How We’re Different: Focus on interview-style case studies and

efficiency over bells and whistles; cover both properties and REITs
What This Course Does NOT Cover
• Excel and Accounting/Finance Knowledge: See the Excel &
Fundamentals course, which is a pre-requisite

• SIMPLE TEST: Do you know what PV, NPV, and IRR mean? Do you
understand INDEX/MATCH? If not, the E&F course is better

• Every Single Combination of Models/Property Types/REITs: Our

goal is efficient preparation, not bells/whistles and 200-hour models

• If You Want the Bells and Whistles: There are other options – some
companies and platforms teach only real estate modeling, while we
cover dozens of different industries
What This Course Does NOT Cover
• ARGUS / Other Non-Excel-Based Software: Yes, these can be very
useful, and they’re commonly used in the industry, BUT…

• Focus: They’re not our area – we teach Excel-based models, and we

will cover how to use the output from ARGUS in Excel

• Non-Property/REIT Analysis: We don’t teach private equity fund

modeling, gaming/lodging/homebuilding companies, real estate
operating companies, CMBS, etc. (Too normal or too specialized)

• Usefulness: Some material in this course may still apply to these,

but it’s not our focus (otherwise, course would be 500 hours)
Different Property Types and Strategies
• Office / Retail / Industrial – Long-term-leased to businesses for
business purposes, such as sales or manufacturing

• Multifamily (Apartments) – Medium-term-leased to individuals for

residential purposes – places to live, sleep, raise a family, etc.

• Condominiums – Sold to individual tenants for residential purposes,

and they’re often sold in advance of completion (pre-sales)

• Hotels – Very-short-term-leased to individuals for business or

residential purposes (conferences, clients, vacations, etc.)
 Different Property Types and Strategies
Office / Retail Multifamily Condominiums Hotels

Customers ▪ Businesses ▪ Individuals ▪ Individuals ▪ Individuals

Lease Type ▪ Long-term (several ▪ Medium (1 year?); ▪ N / A – Ownership ▪ Short (days); very
years); details vary very similar leases similar terms

Timing of Lease or Sale ▪ After building is done ▪ After building is done ▪ Pre-sold ▪ After building is done

Purpose ▪ Business ▪ Residential ▪ Residential ▪ Business or leisure

• Other Differences: Much more granular revenue and expenses for

office / retail / industrial properties since there are fewer tenants

• Examples: Lease renewals/expirations, free months of rent,

commissions paid to brokers for individual tenants…
 Different Property Types and Strategies
Closer to “normal” (non- VERY different due to timing
real-estate) companies and revenue/expense detail

Office /
Hotels Multifamily Condominiums Retail /
Industrial

• Other Property Types: Storage, student housing, nursing, lumber,

etc. – they’re all variations of the types above

• Rule of Thumb: Think about the # of tenants and granularity of

revenue and expenses – most will be closer to the Office / Retail or
Multifamily category (little fits into the “Condo” category)
Different Property Types and Strategies
• Strategies: Build a new property, or acquire an existing one

• Strategy #1: Develop and Sell Upon Completion – Offices, Retail,

Multifamily, Hotels

• Strategy #2: Develop and Pre-Sell – Mostly just Condominiums

• Strategy #3: Acquire Existing Property and Do Nothing –

Everything but Condos

• Strategy #4: Acquire Existing Property and Renovate It – Same

 Different Property Types and Strategies
Office / Retail Multifamily Condominiums Hotels

Develop & Sell Upon

Completion

Develop and Pre-Sell

Before Completion

Acquire Existing & Do

Nothing

Acquire Existing &

Renovate
Different Property Types and Strategies
• Financing: Varies quite a bit between the different strategies!

• Loan Types: Construction, Bridge/Temporary, and Permanent

• Construction: Used for new developments, but refinanced into a

Permanent Loan when the property “stabilizes”

• Bridge/Temporary: Often used for “value-added” deals with

renovations and acquisition scenarios – may also be refinanced

• Permanent: Split into Senior (up to 75-80%) and Mezzanine (up to

80-90%) – But percentages, rates, etc. vary based on the region
How to Use This Course
• Quick Reference Guide: Get all the details here!

• CRE / Private Equity / Lending: Focus on individual properties

• Investment Banking: Focus on REITs

• Pressed for Time: Just focus on these shorter 30-90-minute case

studies in this intro module and skip the more complex ones

• More Time / On the Job: Worth looking at the RE PE case studies if

you’re on that side, or the REIT lessons if you’re on the IB side
Recap and Summary
• Topic #1: What This Course Covers

• Topic #2: What This Course Does NOT Cover

• Topic #3: Different Property Types and Strategies

• Topic #4: How to Use This Course