BIWS & REFM models compared to real world models
I have completed all of the financial models and certifications from REFM and I'm going through the BIWS models right now, and was wondering about the level of difficulty of those models in comparison with real life models. Do you guys have any experience with this?
I model acquisitions and developments for a small firm. I went through the REFM, and while it provides a nice base knowledge, most deals are not remotely as cut and dry as the example models. That being said, if you know the principles taught in these types of courses, coupled with a good understanding of the real estate deal, you should be able to figure it all out.
Thanks so much for your reply Bob!
Would you be able to give me some examples of "most deals are not remotely as cut and dry as the example models", as well as what's considered "a good understanding of the real estate deal"?
I finished my MSRE and I' trying to break into REFA from mechanical engineering. Any advice would be greatly appreciated. Thanks in advance.
Sure. I just mean that every deal is going to be a little different and may require some tweaking and customizing of the models. As has been said, if you have a good knowledge of excel functions and how everything flows in a deal you will be fine. Some examples of having a good understanding of the deal are knowing the timing of the capital injections, loan terms, interest only period of loans, liquidity requirements, TI LC and CapEx reserves, construction timing, etc. When I first entered my job i felt that there was a knowledge gap between what I learned in the classroom and real life because I wasn't able to quickly get a sense of the whole deal. I do not know if anything but on the job experience can overcome that though.
Depends who you work for. In my last job, I did acquisitions for a family shop (with $1.5B under management, mind you) that did multifamily value add and our proformas were 3 pages, if that. I created them mostly from scratch because it took 20 minutes at most. This summer I'm working at a large multifamily ground up development firm and our modelis absurdly massive and complex, far beyond what you'd learn in those classes...but it was also created by geniuses or something and all I do is plug in numbers. Absolutely no reason to reinvent the wheel when you already have a spaceship.
As Bob Poling said, it's more important that you understand the concepts behind the models and what all the levers do. Excel functions are easy to pick up.
This is so true.
I have friends at smaller dev shops that do $500M+ projects and once they find a site that looks interesting, the principal will literally drive by and say "ehhh.... sure why not". Proforma? Fuck it. I have no idea how they're successful but the principal just prints money, blows my mind.
I have friends at shops doing small 2 and 3 tenant retail outparcel type of projects (that building in front of your mall with an ATT, mattress store, and Tropical Smoothie) that spend weeks deep diving goddamn every nitnoid detail down to a factor used for weather(how many sunny vs rainy days).
Just depends. Plenty of people have been successful either way. Is it right or wrong? Eh, I'd probably err towards more in depth financial analysis, but its your money feel free to do what you want with it. Just don't expect investors and banks to agree with you since you can't show them in black and white.
CRE you mentioned that "our modelis absurdly massive and complex, far beyond what you'd learn in those classes". Would you be able to give me some examples of this complexity consists of? or recommend a site or book where I can learn about all of these additional layers of complexity? .. Thanks!
just wanted to point out that most spaceships don't have wheels and typically hover in place, so this analogy maybe needs to be revised.
I would concentrate on the REFM model and understand the basics thoroughly. You can add additional layers of modeling/complexity only if you are well versed with the basics. I feel that the more complicated models are still inherently simple, just lots of tabs and references but if you know the basics, you will understand the flow and be able to use it.
We have a pretty complicated model here but I noticed that most experienced folks are able to run the model and get to the meat of the results with minimal inputs because they understand the model and their transaction better than anyone else. I have seen people screw up simple models because they cannot understand how the model works and don't know enough to do a sanity check of the results.
ULI also provides some good free real estate excel models: http://uli.org/book/professional-real-estate-development-developers-too…
OP, assuming you're done with BIWS's course by now, would you recommend it over REFM? I'm thinking of finding new work from where I'm at right now and only have modeling experience from undergrad and from a mentor that works in acquisitions. I odn't have a large budget so idk if both would be feasible.
I'd recommend BIWS. I have learned about more from those case studies.
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