Residential “Build-Hold-Sell” Financial Model

Description
This is a detailed, well-structured and transparent cash flow model for the development of a multi-family residential building. The model features clear navigation, color-codes and error checks. The business model covers the construction, lease of serviced apartments to tenants and then sale of the whole building to a new investor.

The model includes the following investment stages:

1. Acquisition. Although the major investment is in construction capex, there could be certain initial acquisition costs as well. The models allow you to set the acquisition date, price, fixed and variable transaction costs.
2. Construction capex. You can set the amount and timing of various capex items.
3. Operation. The lease model features a detailed and flexible revenue analysis based on prospective tenants’ terms and future lease rates, timing and vacancy assumptions. It also builds a granular opex forecasts, calculates the tax effect.
4. Sale. You can define the holding period, the cap rate and transaction costs at exit. You can choose the method to calculate the NOI for the purposes of valuation (12 month forward, 12 month trailing or 6+6 of each).
5. Distribution of profits between shareholders. The model calculates returns to a preferred partner, if there is one in the project. It then uses a 4-hurdle carried interest waterfall to calculate the distributions between General Partner (GP) and Limited Partner (LP).

The model assumes the investment will be financed by equity and loan. The following funding structure is considered:

- Acquisition loan to finance the initial acquisition and construction. You can set the interest rate, amortization period, interest-only period, arrangement and early repayment fees. You can also choose the loan-to-value (LTV) ratio for the asset and for the renovation costs.
- Refinancing loan. The model allows to set the date of refinancing, parameters of the new loan (interest rate, amortization period, fees etc.). You can refinance just the old amount of loan or take additional funding (as much as refinancing LTV allows) and to distribute (cash out) any extra amounts.
- Mezzanine loan. This loan is drawn at acquisition to bridge any potential gaps in funding. Repaid at exit.

The model produces the cash flow statements at the asset and investor levels. it also calculates key profitability metrics (IRR, equity multiple, gross return, DSCR, peak equity required amount and date) for every investor.

Sensitivities. The model includes numerous inputs which you can change to see the effect on profitability and cash flows. There is also a data table which shows the IRR and equity multiple at various exit date and cap rate assumptions.

The model is accompanied by professionally designed magazine-quality charts to illustrate the findings of the analysis.