Real Estate Professional Developer's Excel Tool Kit
Originally published: 04/01/2017 14:33
Last version published: 18/07/2018 10:44
Publication number: ELQ-88028-3
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Real Estate Professional Developer's Excel Tool Kit

Financial analysis tools for educational purposes

The set of developer tools attached are set to be used together with the third edition of Professional Real Estate Development: The ULI Guide to the Business. These have been broken up into sections in correspondence to the book.

Chapter 3 of the book focuses of development financial feasibility analysis, where land development is analysed using a for-sale method appropriate for a subdivision, condominiums, for-sale homes, and other real estate, in which the product is sold at completion rather than being operated as income-producing property.

Financial feasibility analysis for land development is performed in two stages:

Stage 1: a “quick and dirty” analysis that summarizes the project’s sales revenues, expenses, interest, and profit; and

Stage 2: a multiperiod discounted cash flow (DCF) analysis that provides a detailed forecast of cash flows, equity and loan needs, profits, and internal rates of return (IRR). Where a two-stage model for land development analysis in used instead of a five-stage model for income property analysis (like the one below).

The figures used in the financial analysis model are taken from Veranda, a project developed in Lancaster, Pennsylvania, by Charter Homes.

In chapter 4 of the book, the focus is income property financial feasibility analysis. Here, evaluating financial feasibility for income property development involves a five-stage analysis, each more detailed than the previous one. These stages are:

Stage 1: Simple Capitalization;
Stage 2: Discounted Cash Flow Analysis;
Stage 3: Combined Analysis of the Development and Operating Periods;
Stage 4: Monthly Cash Flows during the Development Period; and
Stage 5: Discounted Cash Flow for Investors.

These stages are summarized in an attached Word file, which explains each stage in more details.

The last attached Excel spreadsheet is based on chapter 6, which focuses on industrial development. A feature box outlines a sample deal structure with a three-tier hurdle rate of return.

This Best Practice includes
4 Excel Spreadsheets, 1 word file

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Further information

Applies best for educational purposes.

It is advised that individuals rely on their own financial assumptions and criteria for feasibility as background to any investment decision

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