24 Comments
 

I guess it depends on the shop but I would argue most use templates. Real Estate Investments are always similar so using a template and modelling in the specifics is a lot quicker and just as good vs. building from scratch. Also most of the time you will look at a lot more deals in real estate vs M&A etc. so building everything from scratch is impractical.

 

Definitely templates. Even if you work for a small family office and you create it the first time, you're going to use that template the next time.

Commercial Real Estate Developer
 

Templates generally, as others have said. But if you can create one in your own time and your manager likes it better, then that would be a great thing.

I'll say though, as a learning experience, the best thing I did was recreate the template my company was using from scratch. Really good for helping learn the ins and outs of the model, how it functions, can be improved etc.

 

Templates but if I have down time (usually around Christmas) I will build a basic model and see how fast I can do it. It is great practice and if you time yourself you'll be forced to focus on the key inputs / return drivers.

The toughest things to model from scratch in my opinion are: 1) Rent roll / lease up. 2) Equity / debt draw schedule and 3) JV waterfall. With some practice you'll have it down though and feel pretty damn good about yourself.

 

Also, forgot to add for the new folks out there the key to modeling is understanding what is going on in the transaction NOT using fancy excel functions. Once you get a basic model built then you start worrying about cute functions and formatting. Seems obvious but I always see young guys fall into the trap.

 

This is key. Whenever I have a timed excel test for an interview I keep the actual excel functions as simple as possible (like I'll create a 10 YR rent/expense schedule tab real quick and just hard code any values that aren't "Y1 is X grown by Y annually" to feed a cash flow statement.)

Some IF statements here and there but at the start definitely focus on getting the numbers correct and knowing how to calculate the shit that matters, while at least laying it out in a way where people can understand it.

I'll finish a modeling test the easiest way with least room for error first, and if I get it done 30 min early I'll go back in and find ways to make it look better / display higher level command of formulas.

 

95% of the time you will use an existing template. The only time you will create from scratch or heavily modify an existing template is when you are looking at a deal that is so unique and has so many nuances or idiosyncrasies that it's easier to build from scratch than use a template.

In my opinion, I think everyone should create all models from scratch in the beginning so you know how to do it, yet as others have stated it's highly impractical to always build from scratch.

 
"goodL1fe" In my opinion, I think everyone should create all models from scratch in the beginning so you know how to do it, yet as others have stated it's highly impractical to always build from scratch.

I agree, and if your new firm prefers their exisiting template, i find it well worth the time to completely rebuild their template into a blank excel file to truly understand how everything ties together.

 

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