Real estate models

I was wondering fellow CRE members, I know that we get some flack from fellow financiers for our models. What are some more complex real estate models?

Comments (15)

 
Apr 25, 2020 - 2:49pm

Tell them to have fun watching their livelihood automated away over the next 10-20 years, then tell them to pound sand. Anyone who relishes in increasing life's complexity deserves to be trolled into eternity.

"Who am I? I'm the guy that does his job. You must be the other guy."
 
Apr 25, 2020 - 3:07pm

Try modeling or explaining a multi-tier waterfall cash flow distribution scheme with look-back IRR based hurdles. That will go toe to toe with most LBO or other complex deal structure models the I-bankers do (like in the M&A shops).

The fact that it is generally easier to estimate rents on a building or set of buildings for multiple years than estimating sales of toothpaste from 12 countries year by year is not our fault!

 
Most Helpful
Apr 25, 2020 - 7:42pm

To some extend everyone is who said you don't need complex...they are wrong.

There are two camps to complex, the entire 1-2 page of inputs that is a black box and those with a dashboard and annual return rollup below. I've seen models so complex that I could not edit easily, in that case what is the point. But, if you can make a complex model with separate budgeting, draw, waterfall, monthly, yearly rollup, financing tab that all rollup to one summary page with cash inflows and outflows, yeah that makes a complex model look really simple.

I'VE seen simple models not include any lease-up period, I've seen models be off 2 million dollars in capitalized interest cost. I've seen simple models have an ltv sizing when the project ended up being dscr constrained.

To @MokeyWrench, do you really think the analyst position is going to be automated? I don't, that is where you grow and teach future VPs and MDs about the business. It is not like a position that exists for 10-30 years, you generally move up from analysis to management and if you did not spend your time in the analyst period you wouldnt really knwo what you are doing.

 
  • Associate 1 in RE - Comm
Apr 25, 2020 - 8:33pm

Having worked in both banking and REPE, I honestly think the RE models I'm working on now are more complex...

 
  • Analyst 3+ in RE - Comm
Apr 25, 2020 - 9:52pm

less is more. GIGO. make sure assumptions and inputs are solid. that's the most important.

complexity probably leads to more BS models. no need in RE. JUST GET DEALS DONE.

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