RE Excel Modeling: Study Techniques & Best Practices?

Just a bit of background...Currently in an investment sales role at a big brokerage house (think CBRE, JLL, Cushman) primarily focused on private capital (we sell assets between $2-$25 million). Looking to make a big transition in the next few years to a team or shop with institutional deal exposure. Primarily interested in Eastdil (Investment Sales or Debt/JV Placement) to be quite frank.

I recently got my hands on the REFM's "Real Estate Finance Bootcamp" to brush on the quantitative side of real estate. I have intentions of studying and getting certified in Argus after I finish studying REFM's material.

I know the Argus certification is NOT going to carry much weight when I begin to evaluate other career opportunities but I want to have a very sound understanding of the platform and underwriting. I am very eager to start using Argus on my own deals without leveraging analysts so I can get comfortable with using the program on live deals.

1) Has anyone here used REFM's material for self study?

2) How are you studying the material? Any 'best practices' or study techniques that worked well for you?

3) How does modeling in excel compare to Argus?

If you have any other guidance or comments on real estate financial modeling or Argus please feel free to chime in. Thank guys.

 

I've done the Wallstreet prep Real estate modeling program, which is great. I've also used ARGUS DCF to build pro formas and do cash flow analysis for mixed use properties, multifamily housing, and hotels. In my opinion, I think it would be wise to start with a RE financial modeling program and learn to build the model from scratch. That way you can see everything that goes into it, how all the numbers and assumptions flow together and get to the final result.

With ARGUS, all that stuff happens behind the scenes, and you basically just input your assumptions and out pops the analysis with IRR's etc, but you don't really get a great understanding of everything that is happening. Thats why I think its better to do it the hard way in Excel first, then move onto ARGUS where you can appreciate the computing power of the software and really know what's going on.

 

I just finished the REFM Office self study. I learned a lot. What I did not learn, and what is not in the course are modeling some critical assumptions. Like MLA's. What makes some folks here so valuable is that they can model in probability of lease renewal or extension for any number of tenants with any number of sqft leased. The self study course does not get involved at all with any of that.

 
Best Response

Most of it is logic like looking at in-place versus market to shade your renewal % downwards or upwards. Additionally, in retail you usually have tenant sales reported so you calculate occupancy costs. You'll find specific types of tenants have occupancy costs in certain range and some public retailers even report what their occupancy costs are.

Acquisition firms usually have general rules of thumb that they stick to on renewal percentages (65% to 75%) unless you have a good reason to diverge. Example 1) an industrial tenant has a 10 year contract to make materials for a company that is located next door and the lease is up in 2 years so you put a 80% (or whatever) of renewal instead of whatever standard renewal percentage you use.

One thing to note is that ARGUS DCF rounds up or down on the blended months downtime so if the new tenant MLA is 50%, months vacant=9, ARGUS DCF will round 4.5 (50% * 9 + 50% *0 = 4.5) to 5 months. ARGUS does not understand partial month periods well at all.

 

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