Has anyone ever used it in REPE or any other form of Acquisitions? I've read a few articles about Monte Carlo simulations to test rent growth rates or construction options.. basically a fancier sensitivity analysis?
Curious if there is anyone that's come across it, heard of someone using it, or heard that someone's heard of somebody using it before..
Interested in hearing opinions if there's harder science than excel and argus in real estate finance
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I'm sure someone does use it somewhere, but 99.9% of people do not. Sounds like analysis paralysis.
what would they use it for? yeah all of the examples i've seen are more academic work... nothing simple to integrate into the analysis
If you wanna take things to the next level take the time to learn VBA or python instead. I’ve never heard of anyone using MATLAB in finance.
Monte Carlo is more suitable for cases that can apply The Law Of Large Numbers and Central Limit Theorem, e.g., MBS, CLO, CDS. I can't think of a reason why it is necessary for real estate.
99.9% of real estate investors are not sophisticated enough to do this. The only place I could see this really being useful is if you're a blackrock sized company trying to decide if you want to invest in an emerging market. Christ, half the models I see that come from external parties barely work or are 50% manual inputs that don't flow through.
Why? It's like swatting a fly with a thermonuclear bomb.
I use a good bit of Matlab, never for my cash flow modelling would be a fucking nightmare, Excel is so handy for clear visualisation/storage of the data, matlab is a disaster for this, have you ever ran a GARCH model you get like hundreds of output variables/vectors !!
However I'm very into time series modelling my real estate/Macro data to support my investment thesis so would do things like Johanssen's Cointegrating (Trace test & Max Eiguenvaule) for long run equilibrium estimation say between credit GDP etc. etc., Vector Error Correction Models, will do VARs and the impulse response functions, Markov Regime Switching models are also very useful in capturing the different market cycles.
I fucking cringe when I see some point with a linear regression explain market prices (with serial autocorrelation) and you ask the person what the Durbin Watson test were and they blankly stare you in the face....
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