Real Estate Development Budgeting - Advanced
Originally published: 20/07/2020 16:43
Last version published: 26/02/2021 09:30
Publication number: ELQ-75067-4
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Real Estate Development Budgeting - Advanced

A new look at financial modeling. Real estate development template for budget vs. actual per line item.

Description
The highest level summary of this template is a financial planning tool that allows the user to enter their budgeted costs per line item and by month (across 48 months) as well as planned sales of the units/land that has been developed. Based on all of these things happening, the final result is an equity requirement value per month and a cash flow value per month. This is used to show an IRR and ROI of the total project.

Some of the nuances:
1. Allows for up to 3 phases, but any phase that is not needed can be left blank.
2. Has a LTV rate that defines how much of the required cash will be covered with a bank loan vs. equity. If all equity then the % can be zero.
3. A running balance of debt and interest accrued (measured against an initial interest reserve)
4. A budget and actual summary (monthly and annual)
5. Both the budget and actual monthly and annual tabs have a summary that totals each line item and measures the % of budget that has been utilized (including equity required).
6. A defined % for how much of the sales proceeds must be used to pay down loans (this is good when you have sales happening while development of other phases are happening).

The thing that is different with this model, and has been done on purpose, is that the user actually enters the values on the model itself in the relevant month. The reason why is because with a real estate development project, you need the flexibility to enter values across varying amount of months (for both budget and actual purposes). So, there is no good way to automate this in a meaningful way short of just letting the user enter the values on the monthly model tabs themselves.

Not shown in video: I added 3 monthly comparison charts - equity required, cash flow, and equity position.

This Best Practice includes
1 Excel template and 1 tutorial video

Acquire business license for $45.00

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Further information

Planning out the financial requirements of a real estate development project (monthly and annual periods).

A developer / investor in a real estate development project that may or may not need debt financing.

A joint venture.

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