Buying Real Estate Units (up to 10) - Improvement Construction / Rent PSF Logic

A user friendly real estate acquisition model built off of per unit drivers. Includes exit valuation, IRR, joint venture capable.

by Jason Varner
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Description
This model was designed for easy of configuration and quick analysis of properties with up to 10 units. Operating Profits and final cash flow / equity requirements are tracked on a monthly and annual view. All of the inputs are on the monthly model tab to make things easy to see as they are changed. Much of the inputs are based on an input number for the month something begins/ends.


This financial model goes out for a period of 10 years (the user can define the exit month in any of the 120 months). Exit valuations are shown over time based on a defined exit cap rate.


All items effecting cash flow are shown in a clean section by months and year so it is easy to see all areas of operations from the purchase price, closing costs to the net operating income and terminal value.


The final equity requirement and equity distributions flow to a joint venture waterfall that has IRR hurdles. If this is not a joint venture, you can simply enter 100% for the cash distributions/contributions for the Sponsor side.


This template also includes a DCF Analysis and the IRR of the sponsor/investor pools.


There is logic to define initial rent per square foot per year and then a new rent per square foot per year for each of the 10 units individually. Then, there is a stabilized rent and expense growth rate that applies accordingly. The idea behind this logic is to account for possible on-going operations of some units where they may not be under construction and rent is collected right away, or where renovations take place and rent is a certain figure before and during, and a new figure afterwards that needs to be different than the long-term rent growth rate.


Costs are defined on a per unit basis except for property taxes.

This Best Practice includes
1 Excel model and 1 Tutorial Video