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Real Estate Investment Model in Excel: How to Use it Right


When using your real estate investment model, whether it is an Excel template or an out of the box application, there are several things you should look at. These can be regarded as guidelines for estimating income in any residential or multi space property investment.

From the beginning, you need to have a clear and comprehensive plan for the property acquisition, funding, rehab, rental plan, advertising, taxes, legal and other revenue and costs. This implies an inspection of the parcel should have already been completed. You should know with a bit of precision the borrowing rates and terms and conditions you are likely to obtain from your bank. You absolutely must know the expected taxes and insurance rates. Finally, if the property was occupied for rental previously you should get as much rental background as possible, which would include data by unit, renters, month, year, and percentage timely vs. past due payments.

This provides a comprehensive idea of the property from a money standpoint and prepares you to enter solid data in your real estate investment model. Next, you need to enter as much data possible into the spreadsheet. Each different real estate investment model requires unique data and formatting. The most popular is monthly or quarterly data.

Once this is done you will be able to identify holes in your data, which you'll want to complete based on your preliminary assumptions or previous knowledge, or go back and get more historical data.

Third you need to get a base scenario. This is typically the property "as is" without any alterations to the renters, building state, taxes, insurance, rental rates, financing, etc. This provides you with a view on what type of cash flows the potential investment generates now, which you can project into the future.

At this point, you may also make a preliminary go or no go decision on the investment. Finally, if you've chosen to move ahead you can begin modeling various scenarios in the real estate investment model. Let's say I repaint and landscape? What if I evict the current tenants and replace them with fresh higher paying tenants at higher rents? What if we obtain a local development grant? What are my borrowing rates and how can the break even point change as interest rates change? What if I get a 2nd loan? How large does the down payment need to be? What if we advertise? Just how much does that cost, how quickly will it get new tenants, at what price, and how can this alter the cash results.

There are several more details consider, but the previously mentioned procedure is a high level guideline for utilizing your real estate investment model.

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Excel Real Estate Model
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