Real Estate Multi Family Development Excel Model
Originally published: 11/07/2019 07:56
Last version published: 16/04/2020 06:47
Publication number: ELQ-37109-9
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Real Estate Multi Family Development Excel Model

Real Estate Financial Model to evaluate a development project, with Equity Waterfall and Advanced Scenarios Modeling

This is a fully functional, institutional quality and dynamic real estate Development Financial Model. It was set up with the guidance of a real-estate expert. It’s a powerful model, yet, very user-friendly that will provide to the user a detailed Excel spreadsheet in which, the viability of an investment in a multi-family real estate property can be accessed with accuracy.

Model Options:

• Dynamic Monthly & Annual Cash Flow: in order to calculate the key investments metrics needed to determine the feasibility of the project, and the overall value of a potential selling the cashflow are calculated in a monthly base;
• Because is a developing project model, the lease-up forecast takes into to account the fact that during the construction phase there is no or limited revenue, and the construction loan interests are capitalized.
• Dynamic construction budget: the construction expenses are modeled following a s-curve (normal distribution), meaning that construction expenses are projected in a way that you have few expenses in the beginning, and then they quickly ramp up to your full project costs;
• Dynamic equity financing: unlike an existing property acquisition where you only need to take your purchase price and multiply by certain percentage and get the loan/equity amount required, this model, trough clever formulae, works backwards to get the required amount and timing for Equity/loan funding.
• Construction Loan: The model assumes that first the constructions expenses are first funded with Equity, once we draw all of our equity; we can, then we can start drawing construction loan tranches in order to pay for the remaining costs of the project.
• Permanent Finance: the model also covers a permanent financing, so once we actually have built out the property and the project has been stabilized, we can refinance the project if we don't decide to sell right way.
• Equity Waterfall Model: the template provides a 3 tier Equity waterfall model, so the user will be able to determine how much capital the limited partner and General partner will get, and their respective rates of return;
• Scenarios: The scenarios modeling sheets provides four possible scenarios based on the Rent, Vacancy, construction Costs and exit Cap rate variance, etc. The base scenario is defined by default with the inputs set on the Investment Summary and the Assumptions sheets.

• The user only needs to input information into the cells formatted in the dark blue font in the Investment Summary and Assumptions sheets. If the contents of a cell are colored black, it means that is a formula.
• The template is provided with information from a hypothetical property, for demonstration purposes that must be erased for a real property valuation;
• The investment summary sheet provides an overview of the property based on several key metrics and assumptions.
• In the Assumptions sheet the user can define the remaining drivers;
• To arrive the sale value this model is designed to capitalize the NOI of the 12 months subsequent to that of the disposition divided by the defined exit cap rate;
• The maximum horizon for this model is ten (10) years;
• For Revenue the user must provide the current rents, the type, quantity and square foot of the different units; other type of incomes per unit , and an annual growth rate per year, applied both to the rents and other incomes;
• For Construction Budget the user needs to set the budget for different categories.

This Best Practice includes
1 Excel file

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Further information

Evaluate the feasibility of a Multi-familiar property development project (with lease-up and selling options) from an investment/investors point of view taking into account various parameters such as operational, leverage capital expenditures, equity structure, etc..

Real Estate Development of a multi-familiar project, with some small adaptation it can also be applied to real estate investments types of property

Does not work well for non-real estate businesses.

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