Recently I was invited to an interview where I was asked on the spot to build a real estate financial model with the following assumptions:
NOI of 1 million
Purchase at a 7% cap rate
Expense margin of 45%
Revenue Growth Yr 1: 7% Yr 2: 6% Yr 3+ 3%
Expense Growth: Yr 1: 5% Yr 2+ 3%
Acquisition closing costs 3%
$750,000 of capex, funded at closing
Leverage: 75% of purchase price (not including closing cost or capex)
Financing: 4% interest rate 30 yr amortization
Sale in year 5 at 7.25% cap rate on forward year NOI
Sale closing costs 2%
Show IRR, profit, and equity multiple
IRR and equity multiple sensitivity tables
- Sensitize exit year (3-6)
- Exit cap rate (6.25% to 8.0% in 25 basis point increments)
I was given 20 minutes to complete. Anyone want to take a crack at it?
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