How to Convince My Boss to Include Excel Modeling Into the Job?
What's up everyone, first time post here.
So to summarize, I currently work at a large real estate firm and work as an analyst in their multifamily department. My job mainly entails managing a large portfolio of mortgage loans and monitoring/reporting their operating statistics, as well as analyzing their cash flows, balance sheets, etc. Some site inspections and I may be getting the life co. loans in my portfolio pretty soon. But overall, pretty basic work once you get the hang of it.
This is my first job out of UG and I took it because of the company's size and resources. I want to continue in capital markets but I see all over here and job postings that financial modeling is almost a must-have once you are in the working environment. Now don't get me wrong, I know how to model in Excel from internships and my real estate finance class taught us Argus Enterprise as well, but at my current job we just DO NOT do any modeling!
I reached out to my boss last week and asked how we could incorporate modeling into our job function and he said to do some research and see if it would be compatible. If so, then we bring it to the actual boss who could approve or deny. Now from my research, I know that multifamily modeling can be done, but I have read that there is no need for it, not worth it etc. Does anyone know how this would be possible? We have an underwriting team in our office and I know that they do model, so I don't want to suggest to the boss we incorporate underwriting, cause then he'll just tell me to go there.
Can we forecast their actual cash flow statements? Interest rates for variable rate deals? Perhaps, group the properties by borrower and project a "mini-portfolio" within my own portfolio? Personally, I have a good amount of deals in my portfolio where Blackstone is the principal, so could we maybe project borrower cash flows if that borrower notable or has many deals/high UPB or some sort of benchmark? I'm really just looking for any type of financial data to forecast that proves to be beneficial.
If anyone has any advice on how I can go back to my boss with a plan on how to incorporate some sort of financial modeling (Excel) into the job function, that would be awesome. I want to gain more exposure to it because I know it is a skill required basically everywhere and I also know that other loan portfolio analyst positions do financial modeling and I would love to know how we can try to get that at my firm.
Appreciate anything!
Hi m_berle, any of these topics helpful:
If we're lucky, the following pros may have something to say: dalevy ODoyleRules apqhung
You're welcome.
I apologize as I am on the equity side so not much experience with underwriting debt and am struggling to understand your day to day role and activities because Excel is essential for any form of financial analysis.
That being said, if your department has functioned this far without it then you may be forcing the issue here. I appreciate your forward thinking especially to enhance your own skills but if that is your goal then why not take some Excel modeling courses on the side? Most of my training is on the job however others I'm sure will chime in on the best financial modeling courses available on a "free time" basis.
How are you not "modeling" right now? All it would entail is adding forward projections for your current work.
We seriously do not do any. We have certain deals where we need to report previous 3 years of cash flows and forecast the next 3, but there are already set models/formulas in those sheets. So basically we are just entering data, not knowing what is truly happening.
Maybe you just answered your own question...but the answer is a little more subtle.
Why not try to understand all of the mechanics associated with your existing spreadsheet model, and see if you could improve it?
That way you're not completely reinventing the wheel (which may make some people nervous) and you will gain a better appreciation for the numbers going into your worksheet.
If you care about the theatrics as well as the knowledge you will gain, you can say something about improving an existing model on the resume. That will signal your ability to model as well as your ability to think critically.
Just make sure if you do end up doing this you save down a test version to play around with in case you screw something up!
It sounds like you do have models... I would try to work closer together with the underwriting team (guys who work with the model) so you can get a better grasp of why things are done.
Ask them to send you the model and play around with it, see what happens to the return metrics when x,y and z happens.
Being familiar with the model allows you to understand why certain decisions are made on site as well as getting a better understanding of the business overall.
Out of curiosity. Can you private message me where you work or give me a clue. Curious what company in that scale that deals with BlackStone not using excel.
Sounds like you're in asset management. I am too and it sucks. Your boss isn't going to listento to you if you're at a large shop. Truth is everybody in AM is either:
Most people in AM are 2's. I really think you're swimming against the current and need to accept that the only excel modeling you'll do willbe on your own time for the next2 years until you get a job that actually requires it
Damn. Is it obvious? Haha I am in AM and definitely a #1 when it comes to your choices. It does seem like the popular answer is to just learn on the side and use it when I leave.
Do you work in loan servicing?
What's your goal here? Do you want to continue with the firm, or do you want to get into a different career track? If the former, I'd just go with what others have said above and teach it to yourself on the side or ask the underwriting team if you can 'shadow' some of their work because you are curious and want to learn it. If you already know you want to leave, it's still probably better to teach it to yourself and then start looking around after you have the hang of it/can put it on your resume in a quantifiable way. Then before you leave (after you have either a firm offer in hand or are VERY close to having multiple lined up) you can bring it up to your team and ask what they can do for you (prior to you giving notice). You will probably end up leaving at this point anyway for greener pastures, but at least this way you'll leave knowing you didn't leave any money/opportunity on the table. You don't want to ask for things before you are in a position of leverage/control.
Excel modeling isn’t your job, I work at GSE and we are bigger than everybody else in multifamily, with over 200B portfolio
Modeling is done by the modeling group folks who are PhDs in Econ and real estate, everyone else in underwriting AM capital market are just model users, leave modeling to the pro
You don't need to have a PhD to underwrite something as simple as a Multilfamily development / acquisition. If that's what they're really doing it sounds like a massive waste of their skill set.
Assuming you aren't trolling, his purpose is to learn modeling, it's pretty obvious it isn't his job now. Having a PhD in Economics to underwrite CRE is like going to John Hopkins medical school to work at a CVS pharmacy.
It's JohnS Hopkins, twat!
When you have over 20,000 CRE properties to manage and does 70B+ business a year, you hire Econ PhD to build models. Our underwriting and asset management relies on the models built by our research team to underwrite over 5000 multifamily properties a year, and we even have many many physics and other engineering PhDs in Capital market to implement the models from matlab/sas to a usable software interface for the front office to use
Also we need to do DFAST stress testing, so yes we hire Econ PhDs, it’s not trolling
Classic.
OP, if your monitoring / reporting on a large portfolio of mortgages, I'm pretty surprised there's not already a model for each asset the mortgages are secured against. It would help streamline the reporting process hugely and would allow you to stress test the asset's ability to service the mortgage.
Even if your boss wont agree with the above, I'd do it anyway during your down time on the job to build the skillset.
What would you be looking to model? DSCR, LTV, DY? You can do those from the models the loan was underwritten with likely, and then update them throughout the life of the loan, and include sensitivity analysis for downside scenarios.
What I really would like to separate here is what Underwriting does in regards to modeling and how I, working in Asset Management, could incorporate some sort of modeling function relative to the job.
I think I might start with reviewing the underwritten models because those at least have CF projections and given market scenarios for each deal. You would think there would be a way to forecast a model with a 15-year deal, 5-year Interest Only period, then variable rate interest for the remaining 10.
From reading here, it does seem like the best option is to learn myself and gain the skillset needed. There is no way I am staying in my role for the long-haul, so this is almost a necessity.
Yeah, it's good to try to review the models to the extent you can to learn how/what they are doing, but just be careful that it's not entirely obvious you're trying to learn the skill-set to leverage/lateral to a new gig.
I echo the others: try to learn on your own through outside resources and study the models your firm currently uses - you might be able to teach yourself by backing into an already built model. There could be some debate that this might be a better way to learn, or at least provide a skill set for reviewing models to make sure they are correct (think more senior level employee).
If you have access to your underwriting people, ask to shadow to see how they do it. You won't learn everything in one sitting but build upon that each time. Or, once you've dissected one, ask why they did something or came to a certain conclusion. Phrase it like it will help you with your AM duties.
Could lateral move if you impress them/show lots of interest, too.
Let's not miss the forest for the trees. I understand that you are eager to learn modeling but that is easy to do and that is what everyone put into their resume.
But take a step back and think what is the goal is your job: "My job mainly entails managing a large portfolio of mortgage loans and monitoring/reporting their operating statistics, as well as analyzing their cash flows, balance sheets, etc."
So it seems like your job is 1) define which mortgage are doing well based on several benchmark key performance indicators; so if I or anyone wants to hire you or if you want to demonstrate your skill set, wouldn't it come down to 1) how you define what is the good mortgage pool to have, 2) how do you trim all the fat so that it consistently generate profit, 3) how do you borrow more debt at a low interest rate and juice up the return when you exist?
If those assumptions were true, modeling is just a fancy of saying using excel as a tool to set up assumptions, produce a data set, set up sensitivity analysis to justify your case. Usually, a lot of the thinking process are done through qualitative analysis rather than financial modeling (i.e. unemployment rate seems to be down, discretionary spending seems to be increasing).
So net net, I would try to take whatever model that you are working on and think from the perspective of an investor. Rebuild the whole model when you get a chance with a clear assumption tab that outline all the factors that can impact the model and an output sheet that produce a set of financial based on those assumptions (usually bear case, normal case, bull case). Then a sensitivity table with 2 key points like interest rate, default rate with potential annual cash flow as the output result). Then have a quick summary that says that based on my analysis, from the entire pool of mortgage, 1) we can buy xyz, 2) from that we can repackage them and price at this yield, 3) with that we sell them at this price, and 4) that will net the investor xyz% in annualized return.
Not really a real estate specialist but just trying to highlight my thinking process.
This is the best advice you could have offered him - I hope he takes it. Try to become a master at your current job, you'll add more value than you know.
Absolutely. Thank you Naoki for the well-thought response, as well as everyone else. I don't want to get lost in future thoughts and disregard my actual position and duties, but I do have the urge to learn more about the way certain sides look at deals and assumptions.
Mastering my current role comes first and I can find the time to build my own model or borrow/ask an underwriter for a current model and mess around with it. I feel like I will be able to learn the process regardless of the above options I choose, after practice of course.
MFOG - I think I will follow your route honestly. Build my own model, learn what factors influence others and be able to comprehend and present the finished product to my boss, once I completely understand what is going on. No harm in just showing him what could be possibly incorporated in the role.
Honestly thank you everyone for the advice. Gained a much better perspective than I originally thought.
As someone who spends all of his time in Excel, this is true. It's difficult to keep a focus on the big picture when you are enmeshed in the minutia all day.
On the other hand, it's probably going to be imperative that you are proficient in modeling if you are going to lateral. And, if you can lateral w/out modeling skills anyhow, you're likely going to be expected to be able to model once you're on the job.
All that to say, Naoki's post is completely correct. To tack on, because it was addressed earlier, I wouldn't just take the models that the PHDs in underwriting put together and reverse engineer them. Building A1 models is the best way to learn.
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