Modeling as a professional vs. as a student
When I was in my MSRE program, I put a lot of time and energy into learning modeling skills. I got pretty good at being able to build proformas from scratch with waterfalls and sensitivities, etc. These skills served me well in being able to perform well on modeling tests and ultimately land a job as an analyst. However, I'm not really putting any of these skills to use as an actual analyst.
I am currently working in REPE and my firm uses a model that was built by a third party. It's a complex model, but it's fairly simple to operate - just plug in a handful of inputs and it spits out everything I need to know. No real "modeling" required on the part of the analyst - no writing formulas or building anything. I understand how the model operates and what inputs are driving the returns, but is that going to be enough to advance in my career?
My concern is that I will get complacent and forget how to model things by hand. Does this matter? (A side question, do firms typically require modeling tests for associate positions?)
I think ultimately that is what modelling truly is. There is a lot of hype on this forum about being excellent at "modelling", but at the end of the day its really just inputs/outputs. If you understand what is going on, then that is all that matters- what is important is testing certain assumptions to make an educated decision, and if you can reach that point with a pre-built model (and do it faster bc it is a pre-built) then you are successfully doing your job. I imagine you went into REPE because you are interested in the deal process and making money (ultimately). People dont generally get into such careers to "model" as an end goal
People on this forum dramatically overemphasize modeling because:
It is primarily an investment banking forum (although I believe RE is the second most popular!)
Firms often have modeling tests as part of the interview process
It is a "hard" skill that you can focus on and feel good about yourself as a result
The reality is that success in real estate has so much more to do with "soft" skills like your ability to intelligently and rapidly respond to constant fire drills, your ability to get the best work out of people who know more than you do about what they do but don't see the big picture, your sense of urgency, your ability to communicate effectively, your network, your body of work, who your dad is, etc.
The only time you'll ever be truly "modeling" something on the job is if you're adding a new function to the company model (which they will outsource if they are big enough). Otherwise, it's plug and play. You need to understand how the model works so that you can effectively audit it, or pull on certain strings to see how it impacts the returns, but you do not need to build it. It would be so unbelievably inefficient and would just welcome mistakes.
Knowing how to model is like knowing what a cap rate is - it's a base line - like brushing your teeth before coming into the office is.
richest guys in real estate I know all did the math in their head of on the back of an envelope
Do not be the guy that re-builds models and is continuously tries to tweak / change how things are done/presented. Easily the worst RE guy and one who doesn't get it.
Everyone has said it - modeling is a small part of the investment process. If you want a deal you make the model work - not vice versa. Younger RE folks rarely understand this.
It may be good practice, but it is both an inefficient use of time and welcomes potential calculations errors.
Maybe if you work for an incredibly interesting company. At most firms, a lot of deals are essentially the same minus a few key variables that you plug into an already built model.